In Eureko V Poland , 106 the Tribunal saw and addressed this problem briefly when it concluded:

end p.984

The Tribunal notes that the unconditional waiver contained in Article 1 of the First Addendum as regards BIT claims is effective and in accordance with international law which recognizes that a party may waive certain rights entitled to international protection. The Second and Third Restatements of Foreign Relations of the United States are clear on this point:

A waiver or settlement by an alien of a claim against a state, made after an injury attributable to that state but before espousal … is effective as a defense on behalf of the respondent, provided the waiver or settlement is not made under duress.

A state's claim against another state for injury to its national fails if, after the injury, the person waives the claim or otherwise reaches a settlement with the respondent state.

International law thus recognizes that an investor may, after a claim against a State has arisen, enter into a settlement agreement with that State and commit to a final waiver of those claims. 107 (Emphasis added)

This statement, however, cuts a long story extremely short. It is still everything but undisputed whether an individual can be the subject of rights in public international law. Additionally, if that should be the case, it would need to be proven that modern investment treaties intend to vest such rights in the investor. These points shall be addressed subsequently.

(a) The Individual as Subject of International Law

Traditionally, international law was defined as governing the relations between states amongst each other. They made international law and were accountable to each other. The term ‘international law’ replaced the older terminology ‘law of nations’ or ‘droit de gens’ which can be traced back to Cicero 108 and reflects this traditional understanding of the role of international law. 109 Hence, the ‘classical’ doctrine of international law did and does not consider the individual a subject, but rather an object of international law—similar to ‘boundaries’, ‘rivers’ or ‘territory’. 110 According to that theory, the individual cannot be the subject of rights and duties under international law.

However, even early in the science of international law, a notion existed that the provisions of international law are directly binding on individuals without the

end p.985

state as an intermediary and that the state and the individual were both subjects of international law. 111 This understanding of the theory of international law has met with growing acceptance, especially since the inter-war period in the 20th century. Increasingly, the human being moved centre stage in international law and it is now recognized that even states act in defence of the interests of the persons behind them, their nationals. 112

Since then, the ‘classical’ theory of international law recognizing solely states as players on the international plane has been confronted with the fact that, although states remain central, international organizations, non-governmental organizations, corporations, and ad hoc transnational groups have increasingly gained influence in that sphere. 113 One of the best examples of such new players, especially international organizations, arriving on the international stage is the United Nations.

The main criterion in determining whether one deals with a subject of international law—and the one often used in an attempt to prove that individuals are merely objects of international law—is the subject's inherent capacity to possess rights and duties. 114 As early as the 16th century a minority of jurists acknowledged—contrary to the predominant view—that ‘non-state entities had internationally recognized legal rights’. 115 Since then, it has been increasingly acknowledged that individuals enjoy rights, both human rights and others. The existence of human rights of individuals is manifested in various treaties, for example in the UN Charter, the Universal Declaration of Human Rights (1948), the International Covenant on Economic, Social and Cultural Rights, the International Covenant on Civil and Political Rights, and very importantly, the Optional Protocol to the Covenant on Civil and Political Rights which sets out in Article 1:

A State party to the Covenant [on Civil and Political Rights] that becomes a party to the present Protocol recognizes the competence of the Committee to receive and consider communications from individuals subject to its jurisdiction who claim to be victims of a violation by that State party or any of the rights set forth in the Covenant.

Individual rights as human rights have also been enshrined in the European Convention for the Protection of Human Rights 1950, the Inter-American Human Rights System of 1969, and the African System of Human and Peoples' Rights of

end p.986

1986. 116 Within the European Community, the individual has been recognized as a subject of law equal to its member states. Thus, the European Court ruled that Community law intends to confer rights upon individuals and declared certain provisions of the Treaty to be directly applicable to individuals. 117

Finally, the International Court of Justice in its judgment in the LaGrand case, also confirmed in 2001 that individuals possess international rights when it held regarding Article 36(1) of the Vienna Convention on Consular Relations of 1963 that:

… The clarity of these provisions, viewed in their context, admits of no doubt. It follows, as has been held on a number of occasions, that the Court must apply these as they stand … Based on the text of these provisions, the Court concludes that Article 36, paragraph 1, creates individual rights, which, by virtue of Article I of the Optional Protocol, may be invoked in this Court by the national State of the detained person. These rights were violated in the present case. 118

By so ruling, the Court went one step further in developing a view which the Permanent Court of Justice (PCIJ) had already begun to articulate in the Polish Railways Workers case in 1928. 119 In its Advisory Opinion, the PCIJ said:

It may be readily admitted that, according to a well established principle of international law, the Beamtenabkommen, being an international agreement, cannot, as such, create direct rights and obligations for private individuals. But it cannot be disputed that the very object of an international agreement, according to the intention of the contracting parties, may be the adoption by the parties of some definite rules creating individual rights and obligations and enforceable by the national courts. That there is such an intention in the present case can be established by reference to the terms of the Beamtenabkommen. 120 (Emphasis in original)

Equally, it is now widely acknowledged that individuals have duties under international law. Frequently used examples for the proof of such responsibilities are the prohibition of piracy as now codified in the United Nations Convention on the Law of the Sea, 121 the prohibition of the illegal use of a flag, 122 individual responsibility for

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the crime of genocide in accordance with the UN Convention on the Prevention and Punishment of the Crime of Genocide, 123 and prohibitions against airline hijacking in the Hague Convention for the Suppression of Unlawful Seizure of Aircraft of 1970 124 as well as the Montreal Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation of 1971. 125126

Of special importance in that regard is the London Agreement of 8 August 1945 which was concluded by Great Britain, the United States, France, and the USSR and to which 19 other states adhered subsequently. It established a tribunal for the trial of war criminals whose offences had no particular geographical location. The Charter annexed to the Agreement, which defines constitution, jurisdiction, and functions of the tribunal as well as principles of international law which the tribunal had to apply, mentions three categories of crimes for which individuals may be tried: crimes against peace, war crimes, and crimes against humanity. The Nuremberg trials were conducted on this basis. There, the tribunal had to consider the issue of individuals as subjects of international law and ruled:

It was submitted that international law is concerned with the actions of sovereign States, and provides no punishment for individuals; and further, that where the act in question is an act of State, those who carry it out are not personally responsible but are protected by the doctrine of the sovereignty of the State. In the opinion of the Tribunal, both these submissions must be rejected. That international law imposes duties and liabilities upon individuals as well as upon States has long been recognized. … On the other hand the very essence of the Charter is that individuals have international duties which transcend the national obligations of obedience imposed by the individual State. 127

Although the fact that individuals can possess rights and duties under international law has been widely acknowledged—to some extent even by conservative jurists— a crucial point of argument for denying an individual the status of a subject of international law has for a long time been the perceived lack of standing of individuals before international tribunals. 128 However, the issue of possessing a right is distinct from the ability to enforce it. The fact that an individual is not able to take measures in order to enforce rights in his own name shall not be taken as evidence for the assertion

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that he is not a subject of law or that they are rights of the state simply because it has the capacity to enforce them. 129 At the same time, this view of limitations on standing is not entirely correct as examples exist of instruments which enable individuals to enforce their rights before international tribunals. 130 They include the Central American Court of Justice created in 1907 in Costa Rica 131 and the International Prize Court which was established through the—never ratified—Hague Convention XII in 1907 and would have allowed individuals injured by the decisions of national prize courts to bring claims against a foreign state. 132 Furthermore, under the Treaty of Versailles of June 1919, individuals who were nationals of the Allied and Associated Powers could bring actions against Germany before Mixed Arbitral Tribunals. 133 The last example of a treaty granting individuals the standing to advance claims against either state to be mentioned here 134 is the German-Polish Convention of 15 May 1922, also called the Upper Silesia Convention. Article 5 of this Convention provided that ‘the question as to whether or to what extent an indemnity for the abolition or diminution of vested rights must be paid by the State, will be settled directly by the Arbitral Tribunal on the complaint of the person enjoying the right’. The Upper Silesia Convention is especially interesting as it grants individuals the right to sue not only the state of which they are not a national, but also their home state. 135

In modern times, examples granting individuals standing before international tribunals are no longer rare. The tables have turned with the arrival of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, also known as the Washington or ICSID Convention, 136 and the by now more than 2,500 bilateral investment treaties as well as important multilateral investment

end p.989

treaties 137 which grant individuals jurisdictional capacity under international law. All of these treaties lay down a foundation for the right of private investors to sue foreign governments for the illegal interference with their investment made in another state. This development was not only not anticipated, it was outright unthinkable for many of the scholars addressing this issue even in the early second half of the last century. 138

It is thus apparent that individuals can possess rights and duties under international law directly, that is without the need for a state as an intermediary, and that they have been given the opportunity to ascertain these rights without the assistance of their home states before international tribunals. Therefore, individuals can be subjects of international law as much as states and international organizations—a fact which is now established enough to have found its way into the Second and Third Restatement of Foreign Relations of the United States, as cited above. This capacity is not diminished by the fact that the scope of these rights and duties is dependent upon the will of the states as the treaties vesting individuals with rights remain instruments concluded between states. 139

(b) The Investment Treaty Regime as a Source of Rights for the Individual

The fact that an individual can be the ‘carrier’ of rights and duties in international law does not yet, however, answer the question whether modern investment treaties

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intend to create a direct relationship between the investor and the state whereby he is given a direct right of action or whether he merely benefits from a permission by his home state to enforce rights which actually belong to the state parties to the treaty. 140

Economic disputes had already arisen frequently prior to the enactment of the investment treaty regime. Whenever the interests of foreign investors were endangered, the traditional method for the settlement of these disputes was by means of diplomatic protection. By engaging in diplomatic protection, a state espouses the claim of its national and pursues this claim in its own name. 141 Before a state could—and to the limited degree it still happens, can—exercise diplomatic protection, the investor must have exhausted all possible attempts to obtain relief through the local courts of the host state. The origin of the claim in an injury to a private interest is no longer relevant and the state becomes the sole claimant. Nevertheless, the state cannot maintain its claim unless the private party has exhausted the local remedies 142 and unless the investor remains a national of the espousing state. 143 Damages to the state are measured by the damages to the private party. 144 On the other hand, the investor has no right to diplomatic protection. He depends on the political discretion and goodwill of his state, which will take a variety of considerations beyond the investor's interests into account when considering whether to take up his case. Even if this state decides to do so, it may discontinue diplomatic protection at any time. It may waive the national's claim or agree to a reduced settlement. 145

Diplomatic protection can moreover lead to serious disruptions of international relations for the states involved. It leads to a politicization of these disputes and

end p.991

provides a ‘source of international friction’. 146 The political element inherent in this settlement process allows power differences to affect the resolution of investment disputes. All these shortcomings of diplomatic protection, in particular from the investor's perspective, are summarized in the statement of the International Court of Justice, which held in the Barcelona Traction case that ‘the State must be viewed as the sole judge to decide whether its protection will be granted, to what extent it is granted, and when it will cease’, a discretion ‘the exercise of which may be determined by considerations of a political or other nature, unrelated to the particular case’. 147 They led scholars to argue in favour of the individual's direct access to the International Court of Justice or special claims commissions for claims of violations of international law. 148

The proponents of the view that the modern investment treaty regime merely creates a means whereby the investor is entitled to enforce rights on behalf of the state is born out of the idea that investment treaties simply ‘institutionalise and reinforce (rather than replace) the system of diplomatic protection’. 149 The tribunal in The Loewen Group, Inc. & Raymond L Loewen v United States of America , a NAFTA case, endorsed this very view by stating: ‘There is no warrant for transferring rules derived from private law into a field of international law where claimants are permitted for convenience to enforce what are in origin the rights of Party states’. 150

This view has generally been expressed by Canada, 151 Mexico, 152 and the USA 153 as respondents in NAFTA proceedings and has been supported by scholars. 154 It essentially adheres to the Mavrommatis Formula of Diplomatic Protection. In the Mavrommatis Palestine Concessions case, the judges held that:

It is an elementary principle of international law that a State is entitled to protect its subjects, when injured by acts contrary to international law committed by another State, from whom they have been unable to obtain satisfaction through the ordinary channels. By taking up the case of one of its subjects and by resorting to diplomatic action or international judicial

end p.992

proceedings on his behalf, a State is in reality asserting its own rights—its rights to ensure, in the person of its subjects, respect for the rules of international law. 155

Although the validity of this approach in classic cases of diplomatic protection is not questioned here, it remains to be seen whether this approach, reflected in the opinion referred to above, whereby investors do not have a direct legal relationship with the host state, is consistent with the reality of modern investment arbitration.

Investment treaties themselves do not expressly name the actual beneficiary of the rights enshrined in them. Therefore, in order to be able to assess their intention in that regard, reference shall be made to Article 31 of the Vienna Convention on the Law of Treaties which provides: ‘A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose’. Furthermore, Article 31(3) of the Vienna Convention provides that for the interpretation of treaties:

There shall be taken into account, together with the context:

(a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;

(b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;

(c) any relevant rules of international law applicable in the relations between the parties.

The general object and purpose of investment treaties, to create favourable conditions for greater direct foreign investment, does not help in drawing any conclusions concerning the issue of the true beneficiary of the rights enshrined in them. Under both possible approaches the investor and his investment enjoy the protection that might bear the incentive to encourage investments. As recourse to travaux pr?paratoires is virtually impossible due to the fact that these do not exist, recourse must be had to the ordinary meaning of the terms of the treaty in their context as well as the means set out in Article. 31(3) of the Vienna Convention. Of crucial importance will thus also be the practice regarding the application of the treaty as it establishes the agreement of the parties regarding its interpretation. A subsequent agreement between the parties regarding the interpretation of the treaty as mentioned in Article 31(1) exists in the shape of the (in)famous Free Trade Commission's interpretation of Article 1105 of the NAFTA; however, this does not deal with the issue at hand.

Hence, some of the essential features of investment treaties, their meaning within the context of the treaty, and their application by tribunals and courts will now be examined below. 156 Of special importance will be the approach followed in the

end p.993

context of diplomatic protection as set out above, as it provides the theoretical basis for the theory pursuant to which only states can be the direct beneficiaries of the rights at issue.

(i) Control over the Claims Brought by the Investor

Claims brought within the framework of an investment treaty are exclusively controlled by the investor commencing the proceedings. He is not obliged to consult or at least inform his home state at any point prior, during, or after the commencement of his arbitration, regarding either its existence or procedural or substantial issues arising from it. He himself is entitled to the damages he may recover and he himself has to bear the costs. This is in stark contrast to the features of claims brought under the regime of diplomatic protection which have been set out above. In that situation, the state controls the claim, decides when to begin, and when to terminate it. The individual is in the hands of the state. Whereas in proceedings under investment treaties, the investor can pursue only his own interests, the state when deciding if and how to proceed against another government will have to take numerous other considerations into account.

If the right acted upon were that of the state, it is difficult to explain why the investor nevertheless is at complete liberty with regard to the commencement and handling of the claim and is under no obligation at least to inform the relevant authorities of his home state. However, provisions stipulating such a requirement have not been traced by the authors. On the contrary, there are instances where the home state actually opposed the proceedings brought by the investor before a treaty tribunal. 157 The aforementioned facts support the view that the investor in modern treaty arbitration pursues his own right rather than that of the state.

(ii) The Nationality of Claims

Modern investment treaties—and jurisprudence arising from them—display considerable flexibility with regard to the nationality requirement they are conditioned upon. Of course, all investment treaties are based on the condition that the investor seeking protection under it has the nationality of one of the state parties to the treaty. With regard to corporations, most modern BITs adopt the test of incorporation. As far as individuals are concerned, only a few BITs contain special requirements

end p.994

going beyond and qualifying that of nationality, for example, by also requiring the investor to be a resident of the home state.

Nevertheless, modern treaties allow for significant flexibility in complying with these requirements. The fact that the nationality test for corporations is satisfied pursuant to the respective seat of incorporation has promoted a growing practice of establishing investment vehicles in a jurisdiction which is covered by a favourable treaty with the host state of the investment. Often these vehicles are shells, which transfer the revenue from the investment to a parent company in a different jurisdiction. Investment treaties sometimes contain so-called denial of benefits clauses requiring that substantial business activity must be conducted within this jurisdiction for the investment to be protected by the treaty (see for eg Art 17(1) ECT and Art 1113 NAFTA).

Moreover, modern investment treaties have taken no precautions against claims relating to a single loss by investors with multiple nationalities due to the broad definition of an investment. Thus, some treaties define an investment as the ownership of either a company incorporated in the host state or the shares in such a company. 158 This may lead to claims by investors of different nationality under different investment treaties with either type of legal interest in the same investment. 159

The acceptance of an ‘indirect’ interest, that is an interest channelled through other companies, in an investment as sufficient to qualify for an investment can equally lead to competing national claims. This was the case in CME v Czech Republic160 and Lauder v Czech Republic , 161 two UNCITRAL proceedings under two different BITs in which the conduct of the same executive organ of the Czech Republic was considered in relation to the same investment. Within ten days, both tribunals reached different conclusions. Both proceedings could exist alongside each other because the CME tribunal recognized CME's shareholding of 99 per cent in a Czech company with the rights to operate a television licence as an investment for the purposes of the Treaty between the Netherlands and the Czech Republic 162 whereas the Lauder tribunal found that Mr Lauder's—who is a US citizen—shareholding in the parent company of CME met the definition of an investment under the Treaty

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between the USA and the Czech Republic. 163 Subsequent decisions have confirmed this approach. 164

In the decision Tokios Tokel?s v Ukraine , 165 however, the tribunal refused to base its decision on the fact that the investment, a company incorporated in Lithuania, was up to 99 per cent owned by Ukrainian nationals, but solely relied on the incorporation of the company in Lithuania in accordance with local rules and regulations, justifying this approach on the ground that it ‘fulfils the parties’ expectations, increases the predictability of dispute settlement procedures, and enables investors to structure their investments to enjoy the legal protections offered under the treaty’. 166

The variety of options under modern investment treaties is fundamentally different from the approach taken in matters of diplomatic protection. There, with regard to protection of corporate interests the ICJ ruled in the Barcelona Traction case 167 that the decisive criteria for the determination of the nationality of the claim is the place of incorporation, thus deciding that Canada as place of incorporation had jus standi. Belgium was denied the right to bring a claim although 88 per cent of the shares of the company belonged to Belgian nationals. 168 A similarly strict approach was taken in the Nottebohm decision, where in relation to individuals the ICJ imposed a requirement of an ‘effective’ or ‘genuine link’ between the individual who has suffered the injury and the national state prosecuting the claim in order for the claim to be admissible. 169 Thus, the Court ensured that only one state would be able to bring a claim for harm suffered by an individual on the basis that this individual ‘is in fact more closely connected with the population of the State conferring nationality than with that of any other State’. 170 Therefore, looking at these two landmark decisions it becomes apparent that in cases of diplomatic protection much effort is placed on channelling the various interests of private individuals and corporations into a single category of nationality with just one claimant state representing the interests at issue. 171 It thus becomes impossible for different claimants to vindicate claims essentially based upon the same prejudice of interests.

As has been shown above, under the investment treaty regime no such ‘channelling of interests’ is apparent in relation to claims advanced by juridical—as opposed

end p.996

to physical—persons. However, an exception to this ‘liberal’ approach under modern investment treaties was made in the Loewen case. 172 In the absence of a special provision in NAFTA dealing with the temporary aspects of the nationality of claims, the tribunal strictly imposed upon the claimant the continuous nationality rule whereby the nationality must be that of the home state at the time of the events giving rise to the claim through to the date on which the award is rendered. The claimant company was incorporated in Canada at the time of the events giving rise to the claim, but after notice of the claim had been filed had been reorganized into a US company. It assigned its claim to a Canadian company established for the sole purpose of retaining the legal title to the claim. 173 The tribunal, recognizing that the ultimate recipient of the benefits of the claim would be the reorganized US company, held that the Canadian special purpose vehicle could not ‘qualify as a continuing national for the purposes of this proceeding’. 174 This decision has caused much controversy as the rule of continuous nationality is itself much debated in public international law, 175 let alone in the context of investment arbitration. This debate will not be repeated here; it suggests, however, that it might not be easily applied in the future.

With regard to individuals, it appears settled in the context of investment treaty arbitration that an individual with more than one citizenship has the opportunity—subject to explicit restrictions in the BIT itself—to rely on any of them as long as the one he relies on in the case at hand is ‘effective’. 176 Thus, the Nottebohm decision is faintly reminiscent. Nevertheless, the true test with regard to the applicability of the doctrine contained in it is still awaited and will be especially interesting with regard to cases involving dual nationals who hold both the nationality of the home as well as of the host state, which are not governed by the ICSID Convention. 177

Despite the Loewen decision, investment treaty jurisprudence has demonstrated that it is not concerned with limiting the claims brought under treaties so as to ensure that multiple interests cannot be vindicated by various claimants arising out of essentially one prejudice suffered. This is a major difference to diplomatic protection proceedings and implies that the national state is not affected by these claims, that is, the respective claimant is not acting on his behalf.

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(iii) The Law Applicable to the Procedure

Proceedings under investment treaties are generally governed by the provisions of the treaty, the relevant procedural rules chosen by the parties, such as UNCITRAL, and the lex fori, that is the municipal law at the seat of the arbitration. However, this is subject to those instances in which the arbitrations are conducted under the auspices of the ICSID Convention where the procedural rules contained in the Convention are exclusively applicable. 178

The law applicable to proceedings between states, especially those conducted within the framework of diplomatic protection, is international law. 179 Certainly, proceedings between states are conducted independently of the seat of these proceedings. Consequently, if the arbitration conducted under an investment treaty were to be considered as essentially one in which an investor acts on behalf of a state, public international law should theoretically be the only law applicable to the procedure. However, as set out above, at least for cases not governed by the ICSID Convention, this is not the case. Hence, the fact the municipal law is considered to govern the arbitration proceedings under modern investment treaties 180 supports the view that under this regime the investor brings claims stemming from a direct right vested in him.

(iv) The ‘Fork-in-the-Road’ Provisions of Treaties

‘Fork-in-the-road’ provisions in investment treaties are clauses stipulating that the investor has to make a choice between the different procedural forums offered to him under the treaty, for example local courts, previously agreed dispute settlement mechanisms, or international arbitration proceedings, in order to have his claims heard. As soon as he, for example, selects the local courts of the host state and has initiated proceedings accordingly, he will not be able to submit the same claim to one of the other forums provided for in the treaty, including international arbitration. 181 However, the loss of access to international arbitration applies only if the same dispute between the same parties is submitted to the local courts. 182 A further restriction may be found in the requirement that a ‘fork-in-the-road’ provision will

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only be triggered if the matter was not only actually submitted, 183 but submitted to an administrative tribunal or a court as defined in the relevant treaty. 184

By contrast, the commencement of proceedings before municipal courts of the host state cannot in any way affect the standing of the home state of the investor to bring a claim for diplomatic protection against the host state. This follows from the nature of the right of diplomatic protection which is vested in the home state of the investor and not in the investor himself. Thus, even the acceptance of a ‘Calvo Clause’ in an investment agreement between the investor and the host state which seeks to cause an effective waiver of potential claims of diplomatic protection will not achieve the aim of preventing the home state from using this remedy. 185

It has been suggested that the aforesaid constitutes further evidence that the investor who sues the host state vindicates his own right rather than that of his home state due to the fact that upon election of local courts by the investor no residual interest in the claim as pleaded survives on the international plane for the national state. However, this would be the case in diplomatic protection proceedings where, although the investor first has commenced proceedings in his own name, the state can still vindicate a claim as both derived from different capacities and based upon different rights. 186 Regardless of whether the investor chooses to vindicate his claim before the municipal courts or an international arbitration tribunal provided for in the BIT at issue, in both cases he does so either pursuing his own right or acting on behalf of the home state—depending which theory one adheres to. Moreover, the ‘fork-in-the-road’ provision will only become effective if the proceedings involve the same cause of action and parties. 187 On that premise, it does not seem surprising that the claim does not survive on the international plane for the home state—even if the obligations owed under the treaty regime were owed to the state—since by selecting the local courts as offered by the treaty the investor did so also on behalf of the state. It is not apparent why the state then should be given a second option to choose or, worded differently, two bites of the cherry. This would only be different

end p.999

if the decision for local courts was made outside the investment treaty regime—at which point the ‘fork-in-the-road’ provision might not take effect and the issue of the distinction between contract and treaty claims as discussed above becomes crucial.

This is not to say that these provisions in investment treaties do not give an indication as to the nature of the relationship between the investor and the respondent state: however, it is not so much the fact that no provision is made ensuring that the claim survives for the home state to take up again in potential proceedings against the host state, but rather that the home state has no means of influencing the investor as to which path he decides to go down. If the investor were acting on behalf of the state, one would presume that the state would take an interest in and be consulted with regard to the means it considered appropriate when defending its rights. However, as was set out above under (a)—this is not the case.

(v) The Exhaustion of Local Remedies

The provisions in investment treaties providing for resort to international arbitration do not generally condition it upon the prior exhaustion of local remedies. On the contrary, Article 26 of the ICSID Convention specifically excludes this requirement ‘unless otherwise stated’. Although the host state is at liberty to make the exhaustion of local remedies a requirement, only a few BITs do so. 188 Only Guatemala has given notice to ICSID that it requires local remedies to be exhausted. Consequently, treaty tribunals have consistently held that claimants can resort to international arbitration directly without first exhausting the remedies offered by local courts. 189

This is in contrast to the traditional procedure to be followed in matters of diplomatic protection which strictly requires the exhaustion of local remedies. This requirement can be considered a concession to the sovereign independence of the host state, which should be presumed capable of rendering justice through its own courts. 190 Equally, the home state will have a genuine interest in the observance of this requirement as it might render justice without it becoming involved—a legitimate hope, especially in light of the burden and the negative repercussions diplomatic protection proceedings can entail.

Hence, if investment arbitrations were proceedings whereby the investor were acting on behalf of the home state, it appears logical that the state parties to the treaties would insist upon the exhaustion of local remedies. The fact that this is not the case supports the view that the right acted upon by the investor is his own, not that

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of the home state. Thus, the home state has no vested interest in the strict observance of this rule.

(vi) The Damages Claimed

The damages claimed in investment treaty proceedings are assessed on the basis of the prejudice suffered by the investor. Any factors beyond the personal economic loss suffered by the claimant investor, for example, any interests of his home state, are not considered.

In diplomatic protection proceedings, the mere assessment of the damages suffered is also conducted on the basis of the damages suffered by the individual. However, other considerations may play a role in the overall evaluation. The difference between the assessment of damages in proceedings where an individual is claiming its rights and those where states are involved on both sides has been explicitly stated by the PCIJ in the Chorzow Factory case, 191 in which it ruled:

The reparation due by one State to another does not however change its character by reason of the fact that it takes the form of an indemnity for the calculation of which the damage suffered by a private person is taken as the measure. The rules of law governing the reparation are the rules of international law in force between the two States concerned, and not the law governing relations between the State which has committed a wrongful act and the individual who has suffered the damage. Rights or interests of an individual the violation of which rights causes damage are always in a different plane to rights belonging to a State, which rights may also be infringed by the same act. The damage suffered by an individual is never therefore identical in kind with that which will be suffered by a State; it can only afford a convenient scale for the calculation of the reparation to the State. 192

The fact that in investment treaty arbitrations the damages are calculated purely on the basis of the prejudice suffered by the investor, which is—at least in theory—in contrast to proceedings involving states, supports the theory that the claims vindicated in these arbitrations are those of the investor.

(vii) Challenge and Enforcement of Awards

The challenge and enforcement of awards is closely linked to the law governing the preceding proceedings, which has been discussed under (c) above. Awards rendered by international tribunals in investment disputes are subject to challenges before the municipal courts at the seat of this arbitration, 193 save awards rendered under

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the auspices of ICSID, and are deemed to fall within the ambit of the New York Convention. 194

Conversely, truly international proceedings are subject only to public international law and the resulting judgments or awards cannot be challenged or reviewed before a local court. 195 Only international courts or tribunals have jurisdiction to hear applications in that regard.

The fact that awards rendered in investment arbitration proceedings between an investor and a foreign state can be classified as ‘commercial’ and can be challenged before local courts is inconsistent with any notion of their having a public international law nature. It is thus further evidence that the relationship these proceedings are based upon exists between the investor and the host state directly.

(c) Conclusion

Considering all of the aforesaid, the interpretation of modern investment treaties in accordance with the principles of Article 31 of the Vienna Convention suggests that, although they are instruments concluded by states, a direct relationship is created between the respondent state and the investor. By virtue of an investment treaty, investors are enabled to vindicate the rights enshrined in them directly, thereby not acting on behalf of a state or deriving this capacity from it. 196 This brings clarity, in particular for the investor who is not dependent on his home state in defending his interests, and allows the investor to have confidence in the process—as far as any legal proceedings can raise confidence for the one who is in them.

It needs to be emphasized that this conclusion arrived at on the basis of the above considerations explicitly relates to the investor's right to commence proceedings against another state granted in modern BITs. This does not automatically and inevitably entail the same implications regarding the substantive rights contained in these treaties, that is, the protection against expropriation, the entitlement to fair

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and equitable treatment, etc. It would be imaginable that these rights remain on the inter-state level as long as the investor, being granted the direct right to invoke proceedings against the host state, can rely upon them when protecting his interests. However, the language in some investment treaties does not support this approach. 197

This issue was addressed in the recent decision on the appeal in Occidental v Ecuador198 where the English Court ruled that:

That treaties may in modern international law give rise to direct rights in favour of individuals is well established, particularly where the treaty provides a dispute resolution mechanism capable of being operated by such individuals acting on their own behalf and without their national state's involvement or even consent. 199…

The Treaty would have to be regarded as conferring or creating direct rights in international law in favour of investors either from the outset, or at least (and in this event retrospectively) as and when they pursue claims in one of the ways provided. … The former analysis is in our view natural and preferable, but it does not matter which applies. 200

The Court thus supported the view that a direct relationship is not just created when the individual pursues a claim, but with the enactment of the treaty since as of that point in time direct substantive rights are created in favour of the individual. Ultimately, however, the important and powerful characteristic of each treaty— crucial in the eyes of the investor—is his capacity to invoke proceedings against a state without interference. 201

Therefore, the question asked at the outset of this chapter, namely whether it is at all possible that an investor be able to waive his right to commence these proceedings

end p.1003

is to be answered in the affirmative. One could pause for a moment and wonder whether such a waiver might be invalid in light of this right's importance, possibly tantamount to that of human rights. 202 In relation to the European Convention on Human Rights, the European Court of Human Rights held that ‘the nature of some of the rights safeguarded by the Convention is such as to exclude a waiver of the entitlement to exercise them, but the same cannot be said of certain other rights’. 203 Subsequently, the European Court observed that the ‘waiver of a right guaranteed by the Convention—in so far as it is permissible—must be established in an unequivocal manner’ 204 and ‘that … [it] must not run counter to any important public interest’. 205 Furthermore, it considered that ‘in the case of procedural rights a waiver, in order to be effective for Convention purposes, requires minimum guarantees commensurate to its importance’. 206

The criteria applicable to a valid waiver of the investor's right to arbitration in the treaty context have not yet been defined. International law does not provide any requirements to be observed. Human rights are concerned with the essence of human being and human dignity. Although economic interests do play an omnipotent role in modern life, they cannot rise to the same importance as human rights and, thus, in the absence of an explicit provision to the contrary, it is suggested that the discretion of an investor in that regard shall be substantially broader than with regard to human rights instruments. Nevertheless, criteria like the expression of a waiver in an ‘unequivocal manner’ and that it should not run counter to ‘any important public interest’ seem worth considering in the context of investment treaty arbitration. 207 Whether or not this is the case will have to be evaluated very carefully by

end p.1004

any tribunal called to make a decision on this point since—although not as important as human rights—the access to protection under an investment treaty is a crucial right for any investor. On the other hand, even if the investor wishes to waive his right to arbitrate under the investment treaty, proceedings of diplomatic protection continue to be available to the home state who can use them in order to safeguard a public interest which it considers at stake. One thing, however, is certain: the rule whereby ‘an important principle of international law should not be held to have been tacitly dispensed with by international agreement, in the absence of words making clear an intention to do so’ 208 should be applied when attempting to determine whether an investor intended to waive his right to arbitrate.

Concluding Remarks

As stated in the introduction, the relationship between international tribunals deriving their existence from bilateral investment treaties and domestic courts is one of the most important and interesting issues of modern investment arbitration. This contribution seeks to provide a general overview of how tribunals have addressed this relationship as well as (some of the) ensuing complications.

Although most tribunals follow the course set in the Vivendi annulment decision by applying an action-based distinction between treaty-based versus contract-based claims, some tribunals prefer to attribute international tribunals broader jurisdiction. This broader jurisdiction includes pure contract claims, although some restrictions have been made, notably by requiring that the contractual parties be the same as the parties before the international tribunal.

Precisely because the basis of the distinction is the nature of the claim, classification and burden of proof as to whether a claim is merely contractual or not are essential. Tribunals have to some extent relied entirely on the claimant's submissions in this respect, although there is also significant support for the notion that some substantive review is required even at the preliminary jurisdictional stage.

A special category of jurisdictional and merits decisions involves so-called umbrella clauses. Here, there is a true divide between those in favour and those opposed to elevation of contractual issue into international issues, by virtue of the umbrella clause. The opponents use different techniques to come to their assessment, varying from more fundamental objections to practical obstacles based on circumstances. At the same time, proponents have not always applied or needed

end p.1005

to apply the umbrella clause in such a way that mere breach of contract was held to amount to a breach of international law. Further case-law and writings will be required to provide guidance on the development of the theory, including the procedural consequences of the elevation. Solutions may well be dependent on revised treaty terms.

A fundamental element of the procedural consequences of a distinction between treaty and contract claims is the question whether the investor can waive his right of access to international arbitration under a BIT, or whether the right to bring a claim is not his to waive, as it is a mere derivative of the state's right vis-?-vis another state. The better view appears to be that investors can be seen as subjects, not mere objects, of international law, which are given direct rights by modern investment treaties and, therefore, can indeed waive these rights, albeit not without consideration of certain factors.

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Weiss, EB, ‘Invoking State Responsibility in the Twenty-First-Century’, 96 AJIL 798 (2002) Footnotes ?The authors thank Professors Christoph Schreuer, Andrea Bjorklund and Ole Spiermann for their valuable comments on a draft of this chapter. 1 Christoph Schreuer, ‘Investment Treaty Arbitration and Jurisdiction over Contract Claims—The Vivendi I Case Considered’, in Todd Weiler (ed), International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, Bilateral Treaties and Customary International Law (London, Cameron May, 2005) at 281. The basic law is and remains the Vivendi case as clearly and meticulously described and analysed in Schreuer's article. To a large extent, the first part of this chapter is therefore based—with his kind permission—on his observations regarding the Vivendi case. 2Compa??a de Aguas del Aconquija SA and Vivendi Universal v Argentine Republic (Case No. ARB/97/3), Award of 21 November 2000, [English original] 16 ICSID Rev-FILJ 641 (2001); 40 ILM 426 (2001); 125 ILR 1 (2004); 26 YB Com Arb 61 (2001) (excerpts), <http://www.worldbank.org/icsid/cases/ada_AwardoftheTribunal.pdf> (Vivendi I). 3Compa??a de Aguas del Aconquija SA and Vivendi Universal v Argentine Republic (Case No. ARB/97/3), Decision on Annulment of 3 July 2002, [English original] 19 ICSID Rev-FILJ 89 (2004); 41 ILM 1135 (2002); 6 ICSID Rep 340 (2004); 125 ILR 58 (2004), <http://www.worldbank.org/icsid/cases/vivendi_annul.pdf> (hereinafter Vivendi II). 4Vivendi I , above n 2 at para 53. 5 Ibid at paras 79–80. 6Vivendi II , above n 3 at para 86. 7 Ibid at para 76 8 Ibid at paras 101, 103, 105. 9 See also N Blackaby, who uses the term ‘separatists’ as opposed to the ‘unionists’ for those pleading for a distinction between the treatment of contractual rights and treaty rights, 2 TDM (August 2005) at 44. 10 Without suggesting that this constitutes a complete overview, the following cases have explicitly referred to or otherwise applied the Vivendi II test: CMS Gas Transmission Company v Argentine Republic (ICSID Case No. ARB/01/8), Award of 12 May 2005, <http://www.worldbank.org/icsid/cases/CMS_Award.pdf>; SGS Soci?t? G?n?rale de Surveillance SA v Islamic Republic of Pakistan (ICSID Case No. ARB/01/13), Decision on Objections to Jurisdiction of 6 August 2003, 18 ICSID Rev-FILJ 301 (2003), 42 ILM 1290 (2003), 8 ICSID Rep 406 (2005), <http://www.worldbank.org/icsid/cases/SGS-decision.pdf>; Azurix Corp v Argentine Republic (ICSID Case No. ARB/01/12), Decision on Jurisdiction of 8 December 2003, 43 ILM 262 (2004), <http://www.worldbank.org/icsid/cases/azurix-decision-en.pdf>, para 88; Joy Mining Machinery Limited v Arab Republic of Egypt (ICSID Case No. ARB/03/11), Award of 6 August 2004, 19 ICSID Rev-FILJ 486 (2004), <http://www.worldbank.org/icsid/cases/joy-mining-award.pdf>; Enron Corporation and Ponderosa Assets, LP v Argentine Republic (ICSID Case No. ARB/01/3), Decision on Jurisdiction (Ancillary Claim) of 2 August 2004, <http://www.worldbank.org/icsid/cases/enron-decision-en.pdf>; Siemens AG v Argentine Republic (ICSID Case No. ARB/02/8), Decision on Jurisdiction of 3 August 2004, <http://www.worldbank.org/icsid/cases/siemens-decision-en.pdf>; Consortium Groupement LESI-DIPENTA v Algeria (ICSID Case No. ARB/03/8), Award of 10 January 2005, [French original] 19 ICSID Rev-FILJ 426 (2004), <http://www.worldbank.org/icsid/cases/lesi-sentence-fr.pdf>; AES Corporation v Argentine Republic (ICSID Case No. ARB/02/17), Decision on Jurisdiction of 26 April 2005, <http://ita.law.uvic.ca/documents/AES-Argentina-Jurisdiction_002.pdf>; Camuzzi International SA v Argentine Republic (ICSID Case No. ARB/03/2), Decision on Objections to Jurisdiction of 11 May 2005, <http://www.worldbank.org/icsid/cases/camuzzi-en.pdf>; Sempra Energy International v Argentine Republic (ICSID Case No. ARB/02/16), Decision on Objections to Jurisdiction of 11 May 2005, <http://www.worldbank.org/icsid/cases/sempra-en.pdf>; Eureko BV v Republic of Poland (Netherlands/Poland BIT), Partial Award and Dissenting Opinion of 19 August 2005. <http://ita.law.uvic.ca/documents/Eureko-PartialAwardandDissentingOpinion.pdf>; Noble Ventures Inc v Romania (ICSID Case No. ARB/01/11), Award of 12 October 2005, <http://ita.law.uvic.ca/documents/Noble.pdf>; Bayindir Insaat Turizm Ticaret Ve Sanayi AS v Islamic Republic of Pakistan (ICSID Case No. ARB/03/29), Decision on Jurisdiction of 14 November 2005, <http://www.worldbank.org/icsid/cases/ARB0329Decisionjurisdiction.pdf>; Jan de Nul NV and Dredging International NV v Arab Republic of Egypt (ICSID Case No. ARB/04/13), Decision on Jurisdiction of 16 June 2006, <http://ita.law.uvic.ca/documents/JandeNuljurisdiction 061606.pdf>; Wena Hotels Limited v Arab Republic of Egypt (ICSID Case No. ARB/98/4), Decision on Application for Annulment of 5 February 2002, 41 ILM 933 (2002), 6 ICSID Rep 129 (2004), <http://ita.law.uvic.ca/documents/Wena-annulment.pdf>. 11Joy Mining Machinery Limited v Arab Republic of Egypt (ICSID Case No. ARB/03/11), Award of 6 August 2004, 19 ICSID Rev-FILJ 486 (2004), <http://www.worldbank.org/icsid/cases/joy-mining-award.pdf>, at para 75. See also Enron Corporation and Ponderosa Assets, LP v Argentine Republic (ICSID Case No. ARB/01/3), Decision on Jurisdiction (Ancillary Claim) of 2 August 2004, <http://www.worldbank.org/icsid/cases/enron-decision-en.pdf>, where similar wording was used, para 49. 12 See also Emmanuel Gaillard, ‘Investment Treaty Arbitration and Jurisdiction over Contract Claims—The SGS Cases Considered’, in Todd Weiler (ed), International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, Bilateral Treaties and Customary International Law (London Cameron May, 2005) at 328 n 15 (referring to the Vivendi-Azurix approach as distinguishing contract and treaty rights based on these being different in nature). For a further discussion of the (application of the) triple identity test and the recognition of lis pendens in investment arbitration in general, see Katia Yannaca-Small, ‘Parallel Proceedings,’ ch 25 below. 13 See Blackaby, above n 9 at 44, who refers to this group as the ‘unionists’. 14Salini Costruttori SpA and Italstrade SpA v Kingdom of Morocco (ICSID Case No. ARB/00/4), Decision on Jurisdiction of 23 July 2001, [French original] 129 Journal du droit international 196 (2002); English translations of French original in 42 ILM 609 (2003), 6 ICSID Rep 400 (2004), <http://ita.law.uvic.ca/documents/Salini-English.pdf, paras 59 and 62. 15Consortium RFCC v Kingdom of Morocco (ICSID Case No. ARB/00/6), Decision on Jurisdiction of 16 July 2001, <http://www.worldbank.org/icsid/cases/rfcc-decision.pdf>. 16 Ibid at paras 68–9. 17Impregilo SpA v Islamic Republic of Pakistan (ICSID Case No. ARB/02/2), Decision on Jurisdiction of 22 April 2005, <http://ita.law.uvic.ca/documents/impregilo-decision.pdf>, para 216. 18 Ibid at paras 218–19. 19 See also Stanimir A Alexandrov, ‘Breaches of Contract and Breaches of Treaty: The Jurisdiction of Treaty-Based Arbitration Tribunals to Decide Breach of Contract Claims in SGS v Pakistan and SGS v Philippines’ 5(4) JWIT 555 (2004), who reviewed the two SGS cases, and concluded that the reasoning of the SGS v Philippines decision, which contrary to the SGS v Pakistan tribunal, accepted the ordinary meaning of the phrase ‘disputes with respect to investments’ was ‘entirely persuasive’ (at 574–5). He also observed that it was hard to agree with the SGS v Pakistan tribunal that the language in the Switzerland-Pakistan BIT ‘somehow excludes disputes based on alleged breaches of contract’, at 576. 20 Alexandrov also concludes that it is not a far-reaching proposition that international tribunals would have jurisdiction over breaches of contract, and that there is no reason to consider that scope of jurisdiction to be overly broad. Ibid at 575. 21SGS Soci?t? G?n?rale de Surveillance SA v Republic of the Philippines (ICSID Case No. ARB/02/6), Decision of the Tribunal on Objections to Jurisdiction of 29 January 2004; 8 ICSID Rep 518 (2005), <http://www.worldbank.org/icsid/cases/SGSvPhil-final.pdf>, para 155. 22 Gaillard, above n 12 at 334. 23 As will be discussed below in Sect (3)(b), the SGS v Pakistan tribunal explicitly dealt with the (analytical) difficulty of accepting elevation of contract claims into international law claims, in a situation in which the contract contains a forum selection claim. In such a situation, the tribunal held that a claimant should not be allowed to pick and choose, but should itself apply the contract of which it seeks performance. 24 The Impregilo tribunal addressed this issue itself and stated: ‘This approach to the overlapping Treaty and Contract Claims—i.e. to recognise that even if the two coincide, they remain analytically distinct—is all the more apposite because of the different rules of attribution that govern responsibility for the performance of BIT obligations, as opposed to responsibility for breaches of municipal law contracts. In this respect, the Tribunal has noted in Section IV.A above that the legal personality of WAPDA is distinct from that of the State of Pakistan, and that the Contracts were concluded by that authority rather than the State itself. As a consequence, the Tribunal has declined to exercise jurisdiction over the Contract Claims presented by Impregilo. In contrast, under public international law (i.e. as will apply to an alleged breach of treaty), a State may be held responsible for the acts of local public authorities or public institutions under its authority. The different rules evidence the fact that the overlap or coincidence of treaty and contract claims does not mean that the exercise of determining each will also be the same.’ Decision on Jurisdiction, 22 April 2005, para 262. It will be interesting to see how other tribunals will deal with this issue. 25 See Sect (3)(b) below. 26 See eg Salini v Jordan , Decision on Jurisdiction, 9 November 2004, para 137; Impregilo v Pakistan , Decision on Jurisdiction, 22 April 2005, para 237. 27Ambatielos, Merits Judgment, ICJ Reports 1953 at 18. 28Islamic Republic of Iran v United States of America , ICJ Reports 1996, II, at 810, para 16. In her Separate Opinion, Judge Higgins proposed the following approach: ‘The only way in which, in the present case, it can be determined whether the claims of [claimant] are sufficiently plausibly based upon the 1955 Treaty is to accept pro tem the facts as alleged by [claimant] to be true and in that light to interpret Articles I, IV, and X for jurisdictional purposes, that is to say, to see if on the basis of Iran's claims of fact there could occur a violation of one or more of them’ (para 32 of the Opinion). 29SGS v Philippines , Decision on Jurisdiction, 29 January 2004, para 26. 30SGS v Pakistan , Decision on Jurisdiction, 6 August 2003, para 157; see also Salini v Jordan , Award of 29 November 2004, para 151. 31Bayindir v Pakistan , Decision on Jurisdiction of 14 November 2005, para 197. This prima-facie test was also applied in: Salini v Jordan , Award of 15 November 2004, paras 31ff; Siemens v Argentina , Decision on Jurisdiction, 3 August 2004, para 180; Plama Consortium v Bulgaria , Decision on Jurisdiction of 8 February 2005, para 119; Jan de Nul and Dredging International v Egypt , Decision on Jurisdiction, 16 June 2006, paras 69ff; as well as in the NAFTA cases UPS v Canada , Award on Jurisdiction of 22 November 2002; and Methanex v USA , First Partial Award of 7 August 2002. However, in the Joy Mining v Egypt decision the tribunal advocated a stricter test in the case before it by stating: ‘It is often argued, and this is the case also in this dispute, that the Tribunal needs only to be satisfied that if the facts or the contentions alleged by the Claimant are ultimately to be proven true, they would be capable a violation of the Treaty. … As a prima facie approach to jurisdictional decisions this is no doubt a useful rule. However, it is a rule that must always yield to the specific circumstances of each case. If, as in the present case, the parties have such divergent views about the meaning of the dispute in the light of the Contract and the Treaty, it would not be appropriate for the Tribunal to rely only on the assumption that the contentions presented by the Claimant are correct. The Tribunal necessarily has to examine the contentions in a broader perspective, including the views expressed by the Respondent, so as to reach a jurisdictional determination. This is the procedure the Tribunal will adopt’ (paras 29, 30). 32Eureko v Poland , Partial Award, 19 August 2005, para 113. The tribunal in IBM World Trade Corporation v Ecuador appears to have done essentially the same when it decided: ‘Therefore, if the claimant considers that a breach is committed upon a right granted by the BIT, such allegation is sufficient for this Tribunal to declare itself competent to hear about it, provided that the other conditions imposed by the Convention and the BIT are complied with’. Decision on Jurisdiction, 22 December 2003, para 63. 33 Gaillard, above n 12 at 337. 34 Christoph Schreuer, ‘Travelling the BIT Route: Of Waiting Periods, Umbrella Clauses and Forks in the Road’ 5(2) JWIT 231 (2004) at 250 (referring to Weill, who coined the phrase ‘trait? de couverture’). 35Art 3(4), <http://www.unctad.org/sections/dite/iia/docs/bits/netherlands_venezuela.pdf . 36Fedax NV v Republic of Venezuela (ICSID Case No. ARB/96/3), Award of 9 March 1998, 37 ILM 1391 (1998); 5 ICSID Rep 200 (2002); 24a YB Com Arb 39 (1999) (excerpts), <http://ita.law.uvic.ca/documents/Fedax-1998-Last.pdf>. 37 Ibid at para 29. 38SGS Soci?t? G?n?rale de Surveillance SA v Islamic Republic of Pakistan (ICSID Case No. ARB/01/13), Decision on Objections to Jurisdiction of 6 August 2003; 18 ICSID Rev-FILJ 301 (2003); 42 ILM 1290 (2003); 8 ICSID Rep 406 (2005), <http://www.worldbank.org/icsid/cases/SGS-decision.pdf>. 39 Ibid at para 165. 40 Ibid at para 168. 41Joy Mining Machinery Limited v Arab Republic of Egypt (ICSID Case No. ARB/03/11), Award of 6 August 2004, 19 ICSID Rev-FILJ 486 (2004), <http://www.worldbank.org/icsid/cases/joy-mining-award.pdf>. 42 Ibid at para 81. 43Salini Costruttori SpA and Italstrade SpA v Hashemite Kingdom of Jordan (ICSID Case No. ARB/02/13), Award of 31 January 2006, <http://www.worldbank.org/icsid/cases/salini-decision.pdf>. 44 See below nn 46–52. 45Salini v Jordan , para 130 (referring to SGS v Philippines , para 114); emphasis added. 46SGS Soci?t? G?n?rale de Surveillance SA v Republic of the Philippines (ICSID Case No. ARB/02/6), Decision of the Tribunal on Objections to Jurisdiction of 29 January 2004; 8 ICSID Rep 518 (2005), <http://www.worldbank.org/icsid/cases/SGSvPhil-final.pdf>. 47 Ibid at paras 115–16. 48 Ibid at para 119; emphasis added. 49 Ibid at para 125. 50 Ibid at para 126. 51 Ibid at para 127. 52 Ibid at para 155. 53Consortium Groupement LESI-DIPENTA v Algeria (ICSID Case No. ARB/03/8), Award of 10 January 2005; [French original] 19 ICSID Rev-FILJ 426 (2004), <http://www.worldbank.org/icsid/cases/lesi-sentence-fr.pdf>, at para 25. 54Eureko BV v Republic of Poland (Netherlands-Poland BIT), Partial Award and Dissenting Opinion of 19 August 2005. <http://ita.law.uvic.ca/documents/Eureko-PartialAwardandDissenting Opinion.pdf>. 55 Ibid at para 257. 56 Ibid at para 258 (citing Schreuer, above n 34 at 253, in support of this proposition). 57 Ibid at para 260. 58Noble Ventures, Inc v Romania (ICSID Case No. ARB/01/11), Award of 12 October 2005, <http://ita.law.uvic.ca/documents/Noble.pdf>. 59 Ibid at para 60. 60 Ibid at para 61. 61 Ibid at para 85. 62 Ibid at para 136. 63 Ibid at para 158. 64CMS Gas Transmission Company v Argentine Republic (ICSID Case No. ARB/01/8), Award of 12 May 2005, <http://www.worldbank.org/icsid/cases/CMS_Award.pdf>. 65 Ibid at para 299. 66 Ibid at para 301. 67 Ibid at para 302. 68El Paso Energy International Company v Argentine Republic (ICSID Case No. ARB/03/15), Decision on Jurisdiction of 27 April 2006, <http://www.worldbank.org/icsid/cases/ARB0315-DOJ-E.pdf>. 69 Ibid at para 70. 70 Ibid at para 74. 71 Ibid at para 81. 72Pan American Energy LLC and BP Argentina Exploration Company v Argentine Republic (ICSID Case No. ARB/03/13), Decision on Preliminary Objections of 27 July 2006, <http://ita.law.uvic.ca/documents/PanAmericanBPJurisdiction-eng.pdf>. 73 Ibid at paras 96–116. Also, El Paso v Argentina at paras 67–87. 74 See, in this context, the SGS v Philippines tribunal's criticism of the decision in SGS v Pakistan (referring to that decision as ‘highly restrictive’), para 120. 75 See, eg El Paso v Argentina , para 76. 76 See, eg Eureko v Poland , para 259 (citing Schreuer, above n 34). 77SGS v Philippines , para 155. But see A Crivellaro's Dissenting Opinion, in which he disagreed with the stay of the proceedings as advocated by the majority of the tribunal. In his view, the dispute settlement provisions both survive and coexist. One does not override the other. The investor could have brought the dispute before either the domestic court or the ICSID tribunal. Accordingly, the most significant advantage granted by a BIT to foreign investors is precisely this right to select the most attractive forum after the dispute arises (Supplementary Declaration, at paras 4–5, <http://ita.law.uvic.ca/documents/SGSvPhil-declaration_000.pdf>). What sets this case apart from most others is that the tribunal had already established, at the jurisdictional stage of the proceedings, that the only conceivable basis of claimant's claim was a breach of contract. Incidentally, this was also the case in Fedax v Venezuela . 78SGS v Philippines at paras 154–5. 79 A V Dicey, L Collins, and JHC Mornis, Dicey and Morris on the Conflict of Laws (London, Sweet & Maxwell, 13th edn, 2000) at 65–80. 80 W?lde describes the approach of the SGS v Philippines tribunal as ‘at first sight, eminently logical’. Thomas W W?lde, ‘The “Umbrella” Clause in Investment Arbitration—A Comment on Original Intentions and Recent Cases’ 6(2) JWIT 183 (2005) at 229. 81 Some tribunals have stressed the significance of the different wording of clauses as a (partial) basis for attributing a different meaning to a clause, see eg SGS v Pakistan , para 166; Salini v Jordan , para 126. Others have recognized that the mere differences in wording do not justify the radically opposed results attributed thereto by the various tribunals, El Paso , para 70. 82Art 31 Vienna Convention on the Law of Treaties. 83 See eg Art II(2)(c) of the US-Bulgarian BIT (<http://www.state.gov/documents/organization/ 43542.pdf>), described by the Noble tribunal as falling in to the category of the most general and direct formulations (para 60). 84 Anthony C Sinclair, ‘The Origins of the Umbrella Clause in the International Law of Investment Protection’ 20(4) Arb Int'l (2004) at 411–34. See also Alexandrov, above n 19, at 566–9. 85 Thomas W W?lde, ‘Contract Claims under the Energy Charter Treaty's Umbrella Clause: Original Intention versus Emerging Jurisprudence,’ in TW W?lde (ed), Investment Arbitration and the Energy Charter Treaty (New York, Juris Publishing, 2006) at 232. 86 Ibid at 235. 87 By contrast, the Eureko tribunal, as one of the tribunals that has given the broadest meaning to umbrella clauses, refers to Sinclair, above n 84 at para 251. 88CMS Gas Transmission Company v Argentine Republic (ICSID Case No. ARB/01/8), Award of 12 May 2005, <http://www.worldbank.org/icsid/cases/CMS_Award.pdf>. 89El Paso Energy International Company v Argentine Republic (ICSID Case No. ARB/03/15), Decision on Jurisdiction of 27 April 2006, <http://www.worldbank.org/icsid/cases/ARB0315-DOJ-E.pdf>; Pan American Energy LLC and BP Argentina Exploration Company v Argentine Republic (ICSID Case No. ARB/03/13), Decision on Preliminary Objections of 27 July 2006, <http://ita.law.uvic.ca/documents/PanAmericanBPJurisdiction-eng.pd>. 90 W?lde, above n 85 at 229. W?lde's analysis is partly based on the Impregilo v Pakistan and RFCC v Morocco decisions, in which the requirement was discussed for a contractual claim to amount to a violation of the BIT: that would require behaviour going beyond that which an ordinary party could adopt (the so-called ‘puissance publique’). These cases did not, however, involve umbrella clauses. 91 W?lde explains that cases made public after June 2005, such as Eureko and Noble , have not been incorporated. It is obviously perfectly proper to state so, but the two decisions are quite crucial to the debate. W?lde indicated that he would be submitting a revised version of his paper including a more extensive discussion of these cases. See W?lde, ibid at 205. Other authors have expressed a more favourable view on ‘elevating’ contractual claims onto the international plane: see Alexandrov, above n 19 at 569, characterizing authorities in favour of transformation as ‘overwhelming’. 92Noble Ventures, Inc v Romania (ICSID Case No. ARB/01/11), Award of 12 October 2005, <http://ita.law.uvic.ca/documents/Noble.pdf>, para 52. 93 W?lde, above n 80 at 206. An argument in favour of a pro-investor interpretation might be the wording of most umbrella clauses as bestowing obligations on the (state) parties rather than referring to rights and obligations, or referring to obligations of the state and the investor. In this light, reference may also be made to the possible parallel with case-law allowing the investor to choose from incorporating certain provisions from other BITs, without being required to incorporate all provisions as a ‘package’, see Siemens v Argentina para 109 (Siemens AG v Argentine Republic (ICSID Case No. ARB/02/8), Decision on Jurisdiction of 3 August 2004; <http://www.worldbank.org/icsid/cases/siemens-decision-en.pdf>); but see eg Plama v Bulgaria , paras 183–227 (advocating a much more limited interpretation of the most-favoured-nation provision in relation to procedural treatment) (Plama Consortium Limited v Republic of Bulgaria (ICSID Case No. ARB/03/24), Decision on Jurisdiction of 8 February 2005, 20 ICSID Rev-FILJ 262 (2005); 44 ILM 721 (2005), <http://www.worldbank.org/icsid/cases/plama-decision.pdf>). 94 W?lde has attempted to list criteria to qualify a dispute as commercial, but concedes the delineation is difficult, W?lde, above n 85 at 236. 95 C Schreuer, ‘The Coexistence of Local and International Law Remedies’, in F Ortino, A Sheppard, and H Warner, Investment Treaty Law—Current Issue Volume 1 (London: BIICL, 2006) at 162 (pointing out that whereas separating contract and BIT terms may be intellectually attractive, it is not necessarily practicable). See also Gaillard, who concludes that a historical examination of the origin of observance of undertakings clauses shows that the intention of states is to permit a breach of contract to be effectively characterized as the breach of a treaty, but that no conflict of jurisdiction arises as each tribunal asserts jurisdiction with respect to a distinct and independent cause of action. Above n 12 at 345. 96 Ibid . 97El Paso at para 77. 98 Jan Paulsson, ‘Arbitration without Privity’ 10 ICSID Rev-FILJ (1995) at 232. 99 See Sect (3)(b). 100 The El Paso tribunal also considered this possibility where it referred to Art 24(1)(1) of the 2004 US Model BIT, which elevates only the contract claims stemming from an investment agreement, para 80. See also W?lde, above n 85 at 211. It is noted, however, that this provision in the Model BIT refers to jurisdiction, not to substantive protection of the kind (arguably) provided by umbrella clauses. (<http://www.state.gov/documents/organization/38710.pdf>) and that, contrary to what W?lde suggests, does not provide for a direct obligation on investors not to breach an investment agreement. 101 A topic not further explored here is the question of what to do in a situation where an international tribunal exercises jurisdiction over contractual issues on the basis of an umbrella clause and is faced with a fork-in-the-road provision. Obviously, it is only when the tribunal agrees to ‘elevate’ a contractual claim that a dilemma occurs. Even assuming that any contractual forum selection clause will not in itself form an obstacle to the tribunal's jurisdiction, it is difficult to see how a distinction on the basis of the nature of the claim would allow the tribunal to overcome the hurdle of the fork in the road. In light of the lack of pertinent case-law, this issue will not be explored further at this stage. 102 Awards which raised this issue include, for example, Lanco v Argentina , Decision on Jurisdiction of 8 December 1998, paras 24 ff; Salini v Morocco , Decision on Jurisdiction of 23 July 2001, paras 25 ff; CMS v Argentina , Decision of the Tribunal on Objections to Jurisdiction, 17 July 2003, paras 70 ff; SGS v Pakistan , Decision on Jurisdiction of 6 August 2003, paras 146 ff; Azurix v Argentina , Decision on Jurisdiction, 8 December 2003, paras 83 ff; SGS v Philippines , Decision on Jurisdiction of 29 January 2004, paras 154; Eureko v Poland , Partial Award of 19 August 2005, paras 174 and 175; Aguas del Tunari v Bolivia , Decision on Jurisdiction of 21 October 2005, paras 109ff. 103 See eg Lanco v Argentina , para 26; Salini v Morocco , para 27. 104 Both the Azurix and the Aguas del Tunari tribunals, as cited above, recognize this problem and, after addressing it briefly, conclude that they need not to decide it, paras 85 and 118, respectively. 105 For a discussion of this issue, see Z Douglas, ‘The Hybrid Foundations of Investment Treaty Arbitration’ 74 BYIL 152 (2003); O Spiermann, ‘Individual Rights, State Interests and the Power to Waive ICSID Jurisdiction under Bilateral Investment Treaties’ 20(2) Arb Int 179 (2004). 106Partial Award of 19 August 2005. 107 Ibid at paras 174 and 175. The Decision on Jurisdiction (21 October 2005) in Aguas del Tunari v Bolivia also addresses this point and states that ‘it would appear that an investor could also waive its rights to invoke the jurisdiction of ICSID’ (para 118) before coming to the conclusion it need not decide this issue in the case at hand (available at <http://ita.law.uvic.ca/documents/AguasdelTunari-jurisdiction-eng_000.pdf>). 108 Cicero, De officiis, lib. III, 17, 69. 109 In certain languages, this term remains still unchanged, for example in German: ‘V?lkerrecht’. 110 For an enlightening summary of this position, see R Higgins, ‘Conceptual Thinking about the Individual in International Law’, in RF Falk, F Kratochil, and SH Mendlowitz (eds), International Law—A Contemporary Perspective (Boulder, Colo, Westview Press, 1985) at 476. 111 M Korowicz, ‘The Problem of the Personality of Individuals’ 50(3) AJIL 533 (1956) at 534 with further references. 112 See eg J Westlake, International Law (Cambridge, Cambridge University Press, 2nd edn, 1910) at 1ff; H Kelsen, Das Problem der Souver?nit?t und die Theorie des V?lkerrechts (T?bingen, 2nd edn, 1928) at 128, 130ff, 159ff; H Lauterpacht, International Law and Human Rights (London, Stevens & Sons Ltd, 1950) at 5ff, 10, 4–5. 113 See EB Weiss, ‘Invoking State Responsibility in the Twenty-First-Century’ 96 AJIL (2002) at 798 and PK Menon, ‘The International Personality of Individuals in International Law: A Broadening of the Traditional Doctrine’ 1 J Transn L & Policy 151 (1992) for an overview over recent developments. 114Reparation for Injuries Suffered in the Service of the United Nations [1949] ICJ Reports 174, 179. 115 Higgins, above n 110 at 478 with references to Plutarch and Francisco de Vitoria. 116 For a more detailed description of the features of these treaties, see PK Menon, above n 113 at 171 ff. Another example of individuals’ rights being recognized in treaties are the administrative tribunals of international organizations. Thus, for example, the United Nations Administrative Tribunal was established in 1949 and is competent to hear applications alleging non-observance of contracts of employment and terms of employment of staff members of the United Nations Secretariat. See DW Bowett, The Law of International Institutions (London, Sweet & Maxwell, 5th edn, 2001) at 416–29. 117Van Gend en Loos, 1 CMLR at 82, 129 (1963). 118LaGrand Case (Germany v US) [2001] ICJ Reports 000 (27 June), para 77; see also Separate Opinion of Vice President Shi. 119Jurisdiction of the Courts of Danzig, Advisory Opinion, 1928 PCIJ (Ser B) No. 15 at 17–19 (3 March). 120 Ibid at 17. 121United Nations Convention on the Law of the Sea, 10 December 1982, UN Doc A/CONF 62/122. 122 Ibid Art 91. 123Convention on the Prevention and Punishment of the Crime of Genocide, 9 December 1948, 78 UNTS 277, 279. 124Convention for the Suppression of Unlawful Seizure of Aircraft, 22 UST 1641, TIAS No. 7192. 125Montreal Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation, 23 September 1971, 24 UST 564, TIAS No. 7570. 126 For a more detailed description of the responsibility of individuals under the mentioned treaties, see Menon, above n 113 at 174–9. 127 I Brownlie, ‘The Individual before Tribunals Exercising International Jurisdiction’ 2 ICLQ 701 (1962) at 706–7. The General Assembly of the UN adopted a Resolution on 11 December 1946 in which, after taking note of the Agreement, it affirmed the principles of international law recognized by the Charter of the Nuremberg Tribunal and the Judgement of the Tribunal ( Brownlie, ibid at 707). 128 One of the crucial examples always referred to in that regard is the Statute of the ICJ, which provides in Art 34(1) that ‘Only States may be parties in cases before the Court’. 129 See Lauterpacht, above n 112 at 27, who states: ‘The position of the individual as a subject of international law has often been obscured by the failure to observe the distinction between the recognition, in an international instrument of rights ensuring to the benefit of the individual and the enforceability of these rights at his instance. The fact that the beneficiary of rights is not authorized to take independent steps in his own name to enforce them does not signify that he is not a subject of the law or that the rights in question are vested exclusively in the agency which possesses the capacity to enforce them.’ Similar observations may be found in Sir Hersch Lauterpacht, ‘The Subjects of the Law of Nations’ 63 LQR 438 (1947) at 451. 130 For an overview over the development of the procedural capacity of individuals, see Menon, above n 113 at 158–63. 131Convention for the Establishment of Central American Court of Justice, 20 December 1907, 2 AJIL 231 (Supp 1908) Art II. 132Convention Relative to the Creation of the International Prize Court, in James B Scott (ed), The Hague Conventions and Declarations of 1899 and 1907 (1915) at 189–90. 133Treaty of Versailles, 28 June 1919, Art 297, 13 AJIL 151 (Supp 1919) at 306. 134 The Supreme Restitution Court, established in 1952 pursuant to the World War II Convention, is not discussed here in detail, but is another example of individuals being able to enforce their rights before tribunals. 135 Korowicz, above n 111 at 552 ff. 136Convention on the Settlement for Investment Disputes between States and Nationals of Other States, 18 March 1965, 71 UST 1270, 575 UNTS 159. 137 Best-known examples for multilateral treaties are of course the North American Free Trade Agreement (NAFTA) of 1 January 1994 between Canada, Mexico, and the USA and the Energy Charter Treaty (ECT) of 17 December 1994. 138 See JL Brierly, The Law of Nations—An Introduction to the International Law of Peace (Oxford, Clarendon Press, 6th edn, 1963) (ed H Waldock) at 277, who states: ‘It has been suggested that a solution might be found by allowing individuals access in their own right to some form of international tribunal for the purpose, and if proper safeguards against merely frivolous or vexatious claims could be devised, that is a possible reform which deserves to be considered. For the time being, however, the prospect of states accepting such a change is not very great.’ Earlier, MO Hudson observed similarly: ‘Some States, e.g. the United States of America, have not been willing to be required to defend against the claims of aliens generally before their own national claims courts; their assumption of an obligation to permit claims to be made against them by individual aliens in an international tribunal, is even more difficult to envisage’. Hudson, International Tribunals (Washington, The Brookings Institution and the Carnegie Endowment for International Peace, 1944) at 202. 139 Note that PC Jessup goes so far to suggest that ‘A treaty would thus no longer be properly defined as an agreement between states; it may be an agreement between a state and an individual’. Jessup, A Modern Law of Nations (New York, Macmillan, 1952) at 27. It is respectfully submitted that at present treaties are public agreements concluded between states on behalf of communities—a logical consequence of the fact that an individual can have the quality of a subject of international law would be that treaties between individuals and states, both acting in their public international law capacity, are possible. However, until now, this remains only theoretical. 140 This debate is not new and has not occurred for the first time in relation to modern investment treaty arbitration. For example, in relation to the Iran-US Claims Tribunal, it was discussed whether the claims brought arose from inter-state disputes or were genuine individuals’ claims against a state. For an enlightening overview of this issue, see Douglas, above n 105 at 160–2. 141 For a more detailed description of this procedure, see WS Dodge, ‘Investor-State Dispute Settlement between Developed Countries: Reflections on the Australia-United States Free Trade Agreement’ 39(1) VJ Trans L 1 (2006). 142 See International Law Commission, Second Report on Diplomatic Protection, UN Doc A/CN.4/514 (2001) (prepared by John R Dugard) (discussing exhaustion of local remedies); International Law Commission, Third Report on Diplomatic Protection, UN Doc A/CN.4/523 (2002) (prepared by John R Dugard) (discussing exceptions to the general principle that local remedies must be exhausted). 143 See International Law Commission, First Report on Diplomatic Protection, Addendum, UN Doc A/CN.4/506/Add.1 (2000) (prepared by John R Dugard) (discussing requirement of continuous nationality); International Law Commission, Fourth Report on Diplomatic Protection, UN Doc A/CN.4/530 (2003) (prepared by John R Dugard) (discussing diplomatic protection of corporations and shareholders). 144Factory at Chorzow (Merits) 1928 PCIJ (Ser A) No17, 28 (Judgment 13 September). 145 For a further overview of the obstacles an investor seeking diplomatic protection has to overcome, see A K Bjorklund, ‘Reconciling State Sovereignty and Investor Protection in Denial of Justice Claims’ 45 VJ Int L 1 (2005) at 12–16. 146 Lauterpacht, above n 129 at 454. 147Barcelona Traction, Light and Power Company, Ltd, 1970 ICJ 3, 44 (Judgment 5 February). 148 Lauterpacht, above n 129 at 453–8; PC Jessup, ‘Responsibility of States for Injuries to Individuals’ 46 Col LR 903 (1946) at 908. 149 J Crawford, ‘The ILC's Articles on Responsibility of States for International Wrongful Acts: A Retrospect’ 96 AJIL 874 (2002) at 888. 150Award, 26 June 2003, Case No. ARB (AF)/98/3 (2003) 42 ILM 811, para 233. 151 Amended Memorandum of Fact and Law of the Applicant, the Attorney General of Canada, The Attorney General of Canada v SD Myers, Inc, Court File No. T-225-01, para 67, available at <http://www.dfait-maeci.gc.ca/tna-nac/documents/Myersamend.pdf>. 152 CH Brower, ‘Investor-State Disputes under NAFTA: The Empire Strikes Back’ 40 Colo J of Trans Law 43 (2001) at 63, 70 citing part of Mexico's submissions in United Mexican States v Metalclad Corporation . 153 Reply to the Counter-Memorial of the Loewen Group, Inc on Matters of Jurisdiction and Competence (26 April 2002) 33ff, <http://www.state.gov./documents/organization/9947.pdf>. 154 M Sornarajah, ‘State Responsibility and Bilateral Investment Treaties’ 20 JWTL 79 (1986) at 93. 155Mavrommatis Palestine Concessions ( Greece v UK ), Jurisdiction, (1924) PCIJ Rep Series A No. 2 (30 August) at 12. 156 These criteria have been addressed in far more detail by Douglas, above n 105 at 169–79. For the purpose of this analysis, it is perceived that the criteria addressed are those essentially illustrating the differences between proceedings truly involving two states and those involving an individual and a state and they will therefore be used here too in order to discuss the issue at hand. 157 In Gami Inc v United States of Mexico , NAFTA arbitration under UNCITRAL, Final Award rendered on 15 November 2004, the home state of the investor, the USA, intervened pursuant to Art 1128 and asserted that the tribunal had no jurisdiction to hear the claim. This argument was rejected (paras 11, 29 of the Award); in Mondev International Ltd v United States of America, Canada, the home state of the claimant, made submissions which insinuated that Mondev's claims should be dismissed. See Second Submission of Canada pursuant to Art 1128, 6 July 2001, <http://www.state.gov/documents/organization/18271.pdf>. 158 eg US Model BIT Art 1(d); Austria Model BIT Art 1(2); Sweden Model BIT Art 1(b); Energy Charter Treaty Art 1(6)(b); NAFTA Art 1139. 159 This was the case in eg CMS v Argentina , ICSID Case No. ARB/01/8, Decision of the Tribunal on Objections to Jurisdiction, 17 July 2003, where the tribunal, after evaluating the facts and upon recognition that its finding might open the door to competing claims from different investors under different treaties in relation to damages suffered by the same company, stated that the fact that the claimant's investment fell with in the definition of an ‘investment’ was sufficient to confer standing upon it in relation to its cause of action and proceeded to rule ‘… that it is not possible to foreclose rights that different investors might have under different arrangements’ (paras 65, 86); Azurix v Argentina , ICSID Case No. ARB/01/12, Decision on Jurisdiction, 8 December 2004, paras 64, 73. 160Partial Award, 13 September 2001. 161Final Award, 3 September 2001. 162CME Partial Award, 13 September 2001, para 376. 163Lauder Award, 3 September 2001, para 154. 164 See eg Waste Management, Inc v United Mexican States , ICSID Case No. ARB (AF)/00/3, Final Award, 30 April 2004, para 80; Franz Sedelmayer v The Russian Federation , Award, 7 July 1998 at 59, however, with Dissenting Opinion on this point. 165ICSID Case No. ARB/02/18, Decision on Jurisdiction, 29 April 2004. 166 Ibid at 40. 167[1970] ICJ Rep 3. 168[1970] ICJ Rep 42, para 70. 169[1955] ICJ Rep 4. 170 Ibid . 171 See also the ‘draft Articles on Diplomatic Protection’ adopted by the United Nations International Law Commission at its 58th session, 2006, paras 4 ff on the issue of nationality. 172Loewen Group, Inc and Raymond L Loewen v United States , ICSID Case No. ARB(AF)/98/3 (NAFTA), Award on Merits, 26 June 2003, <http://ita.law.uvic.ca/documents/Loewen-Award-2.pdf>. 173 Ibid, para 220. 174 Ibid, para 237. 175 For an overview of the positions, see Douglas, above n 105 at n 92. 176 See Olguin v Paraguay , ICSID Case No. ARB/98/5, Award, 26 July 2001, especially para 61. 177 This issue has been addressed and presumably settled in the case Champion Trading v Egypt , ICSID Case No. ARB/02/9, Decision on Jurisdiction, 21 October 2003, which referred to Art 25(2) ICSID Convention which prohibits dual nationals from bringing claims against the state of which they are also a national and therefore did not need to address the issue of the applicability of the ‘effective link’ doctrine. 178Art 44 of the ICSID Convention prescribes the sources of procedural rules for ICSID arbitrations, thereby omitting any reference to domestic law. Similarly, Art 53 excludes any remedies in relation to ICSID remedies except those provided for in Arts 50–2. 179 F Mann, ‘State Contracts and International Arbitration’ 42 BYIL 1 (1967) at 2. 180 This was also confirmed in the recent decisions on the Appeal in Occidental v Ecuador [2005] EWCA Civ 1116, [2005] 2 Lloyd's Rep 707 and in Saluka v Czech Republic of the Swiss Supreme Court dated 7 September 2006 (4P.114/2006). 181 Schreuer, above n 34 at 239. 182 Ibid at 240–1. These are also the criteria applied in the review of whether or not the prerequisites for a defence of lis alibi pendens have been fulfilled. See Katia Yannaca-Small, ‘Parallel Proceedings’ ch 25 below. 183 See eg CMS v Argentina where the tribunal considered that the provision had not been triggered because the claimant had not actually made a submission before the courts, and even if it had, this would not have triggered the clause because the parties and the cause of action were different. Decision on Objections to Jurisdiction of 17 July 2003, para 80. 184Azurix v Argentina , Decision on Jurisdiction of 8 December 2003, para 86. A further argument why a ‘fork-in-the-road’ provision should not be considered a bar to initiating international proceedings is the fact that many BITs contain so-called ‘effective means’ clauses. These clauses guarantee investors effective remedies under domestic law, thereby including redress through domestic courts or administrative tribunals (see eg Art II of the Argentina-US BIT). Although these provisions have not attracted the attention of tribunals (and claimants) these provisions might also be invoked to argue that fork-in-the-road provisions may not be applied in such a way as to create an unreasonable dilemma for investors when having to choose between domestic or international adjudication. See Schreuer, above n 34 at 248–50. 185North American Dredging Co Case (USA v Mexico ), (1926) 4 UN Rep 26, 29. 186 Douglas, above n 105 at 175. 187 See eg Alex Genin v Estonia , Award, 25 June 2001, para 331. 188 C Schreuer, The ICSID Convention— A Commentary (Cambridge, Cambridge University Press, 2001) at 392. 189 See eg Lanco v Argentina , ICSID Case No. ARB/97/6, Decision on Jurisdiction, 8 December 1998, para 39; Generation Ukraine v Ukraine , ICSID Case No. ARB/00/9, Award, 16 September 2003, paras 13.1–13.6; CME v Czech Republic , Partial Award, 13 September 2001, para 417. 190 C Amerasinghe, Local Remedies in International Law (Cambridge, Cambridge University Press, 2nd edn, 2004) at 61. 191Factory at Chorzow, (Merits) 1928 PCIJ (Ser A) No. 17, 28 (Judgment 13 September). 192 Ibid at 28. 193 The recent decision on the appeal of Ecuador against the award in Occidental v Ecuador , [2005] EWCA Civ 1116, [2005] 2 Lloyd's Rep 707 clarified any doubt on this point and rejected arguments on the applicability to the English doctrine of non-justiciability to investment treaty awards. 194Art 1136(7) of NAFTA provides that a claim under Chapter 11 ‘shall be deemed to arise out of a commercial relationship or transaction for the purposes of Article I of the New York Convention and Article I of the Inter-American Convention’. A similar provision is contained in Art 26(5)(b) of the Energy Charter Treaty and in some Model BITs, eg the Austria Model BIT Art 14. 195Factory at Chorzow, (Merits) 1928 PCIJ (Ser A) No.17, 28 (Judgment 13 September), at 33. 196 Supporting this conclusion: J Paulsson, ‘Arbitration without Privity’, in T W?lde (ed), The Energy Charter Treaty: An East-West Gateway for Investment and Trade (London The Hague, and Boston, Kluwer Law International, 1996) at 422, 441; J Crawford, The Creation of States in International Law (Oxford, Oxford University Press, 2nd edn, 2006) at 29; O Spiermann, ‘Twentieth Century Internationalism in Law’ 18(5) European JIL 785 (f 2007); P Juillard, ‘Les conventions bilat?rales d'investissiment concludes par la France’ 106 Journal du droit international 274 (1979) at 290; RJ Zedalis, ‘Claims by Individuals in International Economic Law: Nafta Developments’ 7 American Review of International Arbitration 115 (1996) at 117 n 14; Mohamed Bennouna, Preliminary Report on Diplomatic Protection, UN Document A/CN.4/484 (1998), para 39. 197 See eg the Austrian Model which states in Art 5(3): ‘An investor of a Contracting Party which claims to be affected by expropriation by the other Contracting Party shall have the right …’ (emphasis added). 198[2005] EWCA Civ 1116, [2005] 2 Lloyd's Rep 707. 199 Ibid, para 18 with reference to Oppenheim's International Law (London, Addison Wesley Publishing Company, 9th edn, 1997), para 375. 200 Ibid, para 18 with reference to Douglas, above n 105 at 182–4. 201 It is interesting to note in this context that the ILC's Articles on Responsibility of States for Internationally Wrongful Acts do not go as far as providing that investment treaty rights are rights vested in the investor rather than the state. They adopt a distinction between primary and secondary obligations, see in particular Art 33. The idea behind this is ‘that a breach of a primary obligation gives rise, immediately by operation of the law of state responsibility, to a secondary obligation or a series of secondary obligations (cessation, reparation …)’. See Crawford, above n 149 at 876. By not taking a clear position on the question to whom the primary obligation is owed, the Articles take a rather conservative approach with regard to individuals as subjects of international law in general, and with regard to the rights in treaties, in particular. This was strongly criticized by Weiss, above n 113 at 798ff. Crawford observes in that regard: ‘However, what Article 33 clearly shows is that the secondary obligations arising from a breach may be owed directly to the beneficiary of the obligation, in this case the investor, who effectively opts in to the situation as a secondary right holder by commencing arbitral proceedings under the treaty. A new legal relation, directly between the investor and the responsible state, is thereby formed, if it did not already exist. Thus, at some level a modern bilateral investment treaty disaggregates the legal interests that were clumped together under the Mavrommatis formula’ (footnote omitted). Crawford, above n 149 at 888. 202 Z Douglas, ‘Nothing if Not Critical for Investment Treaty Arbitration: Occidental, Eureko and Methanex’ 22(1) Arb Int'l 27 (2006) at 37. 203Albert and Le Compte v Belgium , Judgment of 10 February 1983, ECHR Series A No. 58, para 35 and H v Belgium , Judgment of 30 November 1987, ECHR Series A No. 127-B, para 54. 204Barber?, Messegu? and Jabardo v Spain , Judgment of 6 December 1988, ECHR Series A No. 146, para 82 and Oberschlick v Austria , Judgment of 23 May 1991, ECHR Series A No. 204, para 51. 205H?kansson and Sturesson v Sweden , Judgment of 21 February 1990, ECHR Series A No. 171-A, para 67, McGonnell v United Kingdom , Judgment of 8 February 2000, ECHR Reports 2000-II, para 44 and Lundevall v Sweden , Judgment of 12 November 2002, not reported, para 34. 206Pfeifer and Plankl v Austria , Judgment of 25 February 1992, ECHR Series A No. 227, para 37; Pailot v France , Judgment of 22 April 1998, ECHR Reports 1998-II, para 52 and Sch?ps v Germany , Judgment of 13 February 2001, ECHR Reports 2001-I, para 48. 207 This was also alluded to by the tribunal in SGS v Philippines , which stated that ‘It is, to say the least, doubtful that a private party can by contract waive rights or dispense with the performance of obligations imposed on the States parties to those treaties under international law. Although under modern international law, treaties may confer rights, substantive and procedural, on individuals, they will normally do so in order to achieve some public interest’ (SGS v Philippines, above n 10 at para 154, footnote omitted). It has been suggested that this ‘public interest’ might make it worth considering drawing a distinction between a waiver of the investor's rights after a dispute has arisen, in full knowledge of the situation, and a blanket waiver for any dispute that might possibly arise in the future. The latter might be more difficult to accept. Nevertheless, this does not change the initial situation whereby these rights are vested in the individual investor and thus limitations with regard to the way he wishes to exercise them need to be made cautiously. 208Elettronica Sicula SpA (ELSI) (United States v Italy ) (1989) ICJ 15 at 42, affirmed in Loewen v United States , Award of 26 June 2003, at para 160. Select Bibliography

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Weiss, EB, ‘Invoking State Responsibility in the Twenty-First-Century’, 96 AJIL 798 (2002) Footnotes ?The authors thank Professors Christoph Schreuer, Andrea Bjorklund and Ole Spiermann for their valuable comments on a draft of this chapter. 1 Christoph Schreuer, ‘Investment Treaty Arbitration and Jurisdiction over Contract Claims—The Vivendi I Case Considered’, in Todd Weiler (ed), International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, Bilateral Treaties and Customary International Law (London, Cameron May, 2005) at 281. The basic law is and remains the Vivendi case as clearly and meticulously described and analysed in Schreuer's article. To a large extent, the first part of this chapter is therefore based—with his kind permission—on his observations regarding the Vivendi case. 2Compa??a de Aguas del Aconquija SA and Vivendi Universal v Argentine Republic (Case No. ARB/97/3), Award of 21 November 2000, [English original] 16 ICSID Rev-FILJ 641 (2001); 40 ILM 426 (2001); 125 ILR 1 (2004); 26 YB Com Arb 61 (2001) (excerpts), <http://www.worldbank.org/icsid/cases/ada_AwardoftheTribunal.pdf> (Vivendi I). 3Compa??a de Aguas del Aconquija SA and Vivendi Universal v Argentine Republic (Case No. ARB/97/3), Decision on Annulment of 3 July 2002, [English original] 19 ICSID Rev-FILJ 89 (2004); 41 ILM 1135 (2002); 6 ICSID Rep 340 (2004); 125 ILR 58 (2004), <http://www.worldbank.org/icsid/cases/vivendi_annul.pdf> (hereinafter Vivendi II). 4Vivendi I , above n 2 at para 53. 5 Ibid at paras 79–80. 6Vivendi II , above n 3 at para 86. 7 Ibid at para 76 8 Ibid at paras 101, 103, 105. 9 See also N Blackaby, who uses the term ‘separatists’ as opposed to the ‘unionists’ for those pleading for a distinction between the treatment of contractual rights and treaty rights, 2 TDM (August 2005) at 44. 10 Without suggesting that this constitutes a complete overview, the following cases have explicitly referred to or otherwise applied the Vivendi II test: CMS Gas Transmission Company v Argentine Republic (ICSID Case No. ARB/01/8), Award of 12 May 2005, <http://www.worldbank.org/icsid/cases/CMS_Award.pdf>; SGS Soci?t? G?n?rale de Surveillance SA v Islamic Republic of Pakistan (ICSID Case No. ARB/01/13), Decision on Objections to Jurisdiction of 6 August 2003, 18 ICSID Rev-FILJ 301 (2003), 42 ILM 1290 (2003), 8 ICSID Rep 406 (2005), <http://www.worldbank.org/icsid/cases/SGS-decision.pdf>; Azurix Corp v Argentine Republic (ICSID Case No. ARB/01/12), Decision on Jurisdiction of 8 December 2003, 43 ILM 262 (2004), <http://www.worldbank.org/icsid/cases/azurix-decision-en.pdf>, para 88; Joy Mining Machinery Limited v Arab Republic of Egypt (ICSID Case No. ARB/03/11), Award of 6 August 2004, 19 ICSID Rev-FILJ 486 (2004), <http://www.worldbank.org/icsid/cases/joy-mining-award.pdf>; Enron Corporation and Ponderosa Assets, LP v Argentine Republic (ICSID Case No. ARB/01/3), Decision on Jurisdiction (Ancillary Claim) of 2 August 2004, <http://www.worldbank.org/icsid/cases/enron-decision-en.pdf>; Siemens AG v Argentine Republic (ICSID Case No. ARB/02/8), Decision on Jurisdiction of 3 August 2004, <http://www.worldbank.org/icsid/cases/siemens-decision-en.pdf>; Consortium Groupement LESI-DIPENTA v Algeria (ICSID Case No. ARB/03/8), Award of 10 January 2005, [French original] 19 ICSID Rev-FILJ 426 (2004), <http://www.worldbank.org/icsid/cases/lesi-sentence-fr.pdf>; AES Corporation v Argentine Republic (ICSID Case No. ARB/02/17), Decision on Jurisdiction of 26 April 2005, <http://ita.law.uvic.ca/documents/AES-Argentina-Jurisdiction_002.pdf>; Camuzzi International SA v Argentine Republic (ICSID Case No. ARB/03/2), Decision on Objections to Jurisdiction of 11 May 2005, <http://www.worldbank.org/icsid/cases/camuzzi-en.pdf>; Sempra Energy International v Argentine Republic (ICSID Case No. ARB/02/16), Decision on Objections to Jurisdiction of 11 May 2005, <http://www.worldbank.org/icsid/cases/sempra-en.pdf>; Eureko BV v Republic of Poland (Netherlands/Poland BIT), Partial Award and Dissenting Opinion of 19 August 2005. <http://ita.law.uvic.ca/documents/Eureko-PartialAwardandDissentingOpinion.pdf>; Noble Ventures Inc v Romania (ICSID Case No. ARB/01/11), Award of 12 October 2005, <http://ita.law.uvic.ca/documents/Noble.pdf>; Bayindir Insaat Turizm Ticaret Ve Sanayi AS v Islamic Republic of Pakistan (ICSID Case No. ARB/03/29), Decision on Jurisdiction of 14 November 2005, <http://www.worldbank.org/icsid/cases/ARB0329Decisionjurisdiction.pdf>; Jan de Nul NV and Dredging International NV v Arab Republic of Egypt (ICSID Case No. ARB/04/13), Decision on Jurisdiction of 16 June 2006, <http://ita.law.uvic.ca/documents/JandeNuljurisdiction 061606.pdf>; Wena Hotels Limited v Arab Republic of Egypt (ICSID Case No. ARB/98/4), Decision on Application for Annulment of 5 February 2002, 41 ILM 933 (2002), 6 ICSID Rep 129 (2004), <http://ita.law.uvic.ca/documents/Wena-annulment.pdf>. 11Joy Mining Machinery Limited v Arab Republic of Egypt (ICSID Case No. ARB/03/11), Award of 6 August 2004, 19 ICSID Rev-FILJ 486 (2004), <http://www.worldbank.org/icsid/cases/joy-mining-award.pdf>, at para 75. See also Enron Corporation and Ponderosa Assets, LP v Argentine Republic (ICSID Case No. ARB/01/3), Decision on Jurisdiction (Ancillary Claim) of 2 August 2004, <http://www.worldbank.org/icsid/cases/enron-decision-en.pdf>, where similar wording was used, para 49. 12 See also Emmanuel Gaillard, ‘Investment Treaty Arbitration and Jurisdiction over Contract Claims—The SGS Cases Considered’, in Todd Weiler (ed), International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, Bilateral Treaties and Customary International Law (London Cameron May, 2005) at 328 n 15 (referring to the Vivendi-Azurix approach as distinguishing contract and treaty rights based on these being different in nature). For a further discussion of the (application of the) triple identity test and the recognition of lis pendens in investment arbitration in general, see Katia Yannaca-Small, ‘Parallel Proceedings,’ ch 25 below. 13 See Blackaby, above n 9 at 44, who refers to this group as the ‘unionists’. 14Salini Costruttori SpA and Italstrade SpA v Kingdom of Morocco (ICSID Case No. ARB/00/4), Decision on Jurisdiction of 23 July 2001, [French original] 129 Journal du droit international 196 (2002); English translations of French original in 42 ILM 609 (2003), 6 ICSID Rep 400 (2004), <http://ita.law.uvic.ca/documents/Salini-English.pdf, paras 59 and 62. 15Consortium RFCC v Kingdom of Morocco (ICSID Case No. ARB/00/6), Decision on Jurisdiction of 16 July 2001, <http://www.worldbank.org/icsid/cases/rfcc-decision.pdf>. 16 Ibid at paras 68–9. 17Impregilo SpA v Islamic Republic of Pakistan (ICSID Case No. ARB/02/2), Decision on Jurisdiction of 22 April 2005, <http://ita.law.uvic.ca/documents/impregilo-decision.pdf>, para 216. 18 Ibid at paras 218–19. 19 See also Stanimir A Alexandrov, ‘Breaches of Contract and Breaches of Treaty: The Jurisdiction of Treaty-Based Arbitration Tribunals to Decide Breach of Contract Claims in SGS v Pakistan and SGS v Philippines’ 5(4) JWIT 555 (2004), who reviewed the two SGS cases, and concluded that the reasoning of the SGS v Philippines decision, which contrary to the SGS v Pakistan tribunal, accepted the ordinary meaning of the phrase ‘disputes with respect to investments’ was ‘entirely persuasive’ (at 574–5). He also observed that it was hard to agree with the SGS v Pakistan tribunal that the language in the Switzerland-Pakistan BIT ‘somehow excludes disputes based on alleged breaches of contract’, at 576. 20 Alexandrov also concludes that it is not a far-reaching proposition that international tribunals would have jurisdiction over breaches of contract, and that there is no reason to consider that scope of jurisdiction to be overly broad. Ibid at 575. 21SGS Soci?t? G?n?rale de Surveillance SA v Republic of the Philippines (ICSID Case No. ARB/02/6), Decision of the Tribunal on Objections to Jurisdiction of 29 January 2004; 8 ICSID Rep 518 (2005), <http://www.worldbank.org/icsid/cases/SGSvPhil-final.pdf>, para 155. 22 Gaillard, above n 12 at 334. 23 As will be discussed below in Sect (3)(b), the SGS v Pakistan tribunal explicitly dealt with the (analytical) difficulty of accepting elevation of contract claims into international law claims, in a situation in which the contract contains a forum selection claim. In such a situation, the tribunal held that a claimant should not be allowed to pick and choose, but should itself apply the contract of which it seeks performance. 24 The Impregilo tribunal addressed this issue itself and stated: ‘This approach to the overlapping Treaty and Contract Claims—i.e. to recognise that even if the two coincide, they remain analytically distinct—is all the more apposite because of the different rules of attribution that govern responsibility for the performance of BIT obligations, as opposed to responsibility for breaches of municipal law contracts. In this respect, the Tribunal has noted in Section IV.A above that the legal personality of WAPDA is distinct from that of the State of Pakistan, and that the Contracts were concluded by that authority rather than the State itself. As a consequence, the Tribunal has declined to exercise jurisdiction over the Contract Claims presented by Impregilo. In contrast, under public international law (i.e. as will apply to an alleged breach of treaty), a State may be held responsible for the acts of local public authorities or public institutions under its authority. The different rules evidence the fact that the overlap or coincidence of treaty and contract claims does not mean that the exercise of determining each will also be the same.’ Decision on Jurisdiction, 22 April 2005, para 262. It will be interesting to see how other tribunals will deal with this issue. 25 See Sect (3)(b) below. 26 See eg Salini v Jordan , Decision on Jurisdiction, 9 November 2004, para 137; Impregilo v Pakistan , Decision on Jurisdiction, 22 April 2005, para 237. 27Ambatielos, Merits Judgment, ICJ Reports 1953 at 18. 28Islamic Republic of Iran v United States of America , ICJ Reports 1996, II, at 810, para 16. In her Separate Opinion, Judge Higgins proposed the following approach: ‘The only way in which, in the present case, it can be determined whether the claims of [claimant] are sufficiently plausibly based upon the 1955 Treaty is to accept pro tem the facts as alleged by [claimant] to be true and in that light to interpret Articles I, IV, and X for jurisdictional purposes, that is to say, to see if on the basis of Iran's claims of fact there could occur a violation of one or more of them’ (para 32 of the Opinion). 29SGS v Philippines , Decision on Jurisdiction, 29 January 2004, para 26. 30SGS v Pakistan , Decision on Jurisdiction, 6 August 2003, para 157; see also Salini v Jordan , Award of 29 November 2004, para 151. 31Bayindir v Pakistan , Decision on Jurisdiction of 14 November 2005, para 197. This prima-facie test was also applied in: Salini v Jordan , Award of 15 November 2004, paras 31ff; Siemens v Argentina , Decision on Jurisdiction, 3 August 2004, para 180; Plama Consortium v Bulgaria , Decision on Jurisdiction of 8 February 2005, para 119; Jan de Nul and Dredging International v Egypt , Decision on Jurisdiction, 16 June 2006, paras 69ff; as well as in the NAFTA cases UPS v Canada , Award on Jurisdiction of 22 November 2002; and Methanex v USA , First Partial Award of 7 August 2002. However, in the Joy Mining v Egypt decision the tribunal advocated a stricter test in the case before it by stating: ‘It is often argued, and this is the case also in this dispute, that the Tribunal needs only to be satisfied that if the facts or the contentions alleged by the Claimant are ultimately to be proven true, they would be capable a violation of the Treaty. … As a prima facie approach to jurisdictional decisions this is no doubt a useful rule. However, it is a rule that must always yield to the specific circumstances of each case. If, as in the present case, the parties have such divergent views about the meaning of the dispute in the light of the Contract and the Treaty, it would not be appropriate for the Tribunal to rely only on the assumption that the contentions presented by the Claimant are correct. The Tribunal necessarily has to examine the contentions in a broader perspective, including the views expressed by the Respondent, so as to reach a jurisdictional determination. This is the procedure the Tribunal will adopt’ (paras 29, 30). 32Eureko v Poland , Partial Award, 19 August 2005, para 113. The tribunal in IBM World Trade Corporation v Ecuador appears to have done essentially the same when it decided: ‘Therefore, if the claimant considers that a breach is committed upon a right granted by the BIT, such allegation is sufficient for this Tribunal to declare itself competent to hear about it, provided that the other conditions imposed by the Convention and the BIT are complied with’. Decision on Jurisdiction, 22 December 2003, para 63. 33 Gaillard, above n 12 at 337. 34 Christoph Schreuer, ‘Travelling the BIT Route: Of Waiting Periods, Umbrella Clauses and Forks in the Road’ 5(2) JWIT 231 (2004) at 250 (referring to Weill, who coined the phrase ‘trait? de couverture’). 35Art 3(4), <http://www.unctad.org/sections/dite/iia/docs/bits/netherlands_venezuela.pdf . 36Fedax NV v Republic of Venezuela (ICSID Case No. ARB/96/3), Award of 9 March 1998, 37 ILM 1391 (1998); 5 ICSID Rep 200 (2002); 24a YB Com Arb 39 (1999) (excerpts), <http://ita.law.uvic.ca/documents/Fedax-1998-Last.pdf>. 37 Ibid at para 29. 38SGS Soci?t? G?n?rale de Surveillance SA v Islamic Republic of Pakistan (ICSID Case No. ARB/01/13), Decision on Objections to Jurisdiction of 6 August 2003; 18 ICSID Rev-FILJ 301 (2003); 42 ILM 1290 (2003); 8 ICSID Rep 406 (2005), <http://www.worldbank.org/icsid/cases/SGS-decision.pdf>. 39 Ibid at para 165. 40 Ibid at para 168. 41Joy Mining Machinery Limited v Arab Republic of Egypt (ICSID Case No. ARB/03/11), Award of 6 August 2004, 19 ICSID Rev-FILJ 486 (2004), <http://www.worldbank.org/icsid/cases/joy-mining-award.pdf>. 42 Ibid at para 81. 43Salini Costruttori SpA and Italstrade SpA v Hashemite Kingdom of Jordan (ICSID Case No. ARB/02/13), Award of 31 January 2006, <http://www.worldbank.org/icsid/cases/salini-decision.pdf>. 44 See below nn 46–52. 45Salini v Jordan , para 130 (referring to SGS v Philippines , para 114); emphasis added. 46SGS Soci?t? G?n?rale de Surveillance SA v Republic of the Philippines (ICSID Case No. ARB/02/6), Decision of the Tribunal on Objections to Jurisdiction of 29 January 2004; 8 ICSID Rep 518 (2005), <http://www.worldbank.org/icsid/cases/SGSvPhil-final.pdf>. 47 Ibid at paras 115–16. 48 Ibid at para 119; emphasis added. 49 Ibid at para 125. 50 Ibid at para 126. 51 Ibid at para 127. 52 Ibid at para 155. 53Consortium Groupement LESI-DIPENTA v Algeria (ICSID Case No. ARB/03/8), Award of 10 January 2005; [French original] 19 ICSID Rev-FILJ 426 (2004), <http://www.worldbank.org/icsid/cases/lesi-sentence-fr.pdf>, at para 25. 54Eureko BV v Republic of Poland (Netherlands-Poland BIT), Partial Award and Dissenting Opinion of 19 August 2005. <http://ita.law.uvic.ca/documents/Eureko-PartialAwardandDissenting Opinion.pdf>. 55 Ibid at para 257. 56 Ibid at para 258 (citing Schreuer, above n 34 at 253, in support of this proposition). 57 Ibid at para 260. 58Noble Ventures, Inc v Romania (ICSID Case No. ARB/01/11), Award of 12 October 2005, <http://ita.law.uvic.ca/documents/Noble.pdf>. 59 Ibid at para 60. 60 Ibid at para 61. 61 Ibid at para 85. 62 Ibid at para 136. 63 Ibid at para 158. 64CMS Gas Transmission Company v Argentine Republic (ICSID Case No. ARB/01/8), Award of 12 May 2005, <http://www.worldbank.org/icsid/cases/CMS_Award.pdf>. 65 Ibid at para 299. 66 Ibid at para 301. 67 Ibid at para 302. 68El Paso Energy International Company v Argentine Republic (ICSID Case No. ARB/03/15), Decision on Jurisdiction of 27 April 2006, <http://www.worldbank.org/icsid/cases/ARB0315-DOJ-E.pdf>. 69 Ibid at para 70. 70 Ibid at para 74. 71 Ibid at para 81. 72Pan American Energy LLC and BP Argentina Exploration Company v Argentine Republic (ICSID Case No. ARB/03/13), Decision on Preliminary Objections of 27 July 2006, <http://ita.law.uvic.ca/documents/PanAmericanBPJurisdiction-eng.pdf>. 73 Ibid at paras 96–116. Also, El Paso v Argentina at paras 67–87. 74 See, in this context, the SGS v Philippines tribunal's criticism of the decision in SGS v Pakistan (referring to that decision as ‘highly restrictive’), para 120. 75 See, eg El Paso v Argentina , para 76. 76 See, eg Eureko v Poland , para 259 (citing Schreuer, above n 34). 77SGS v Philippines , para 155. But see A Crivellaro's Dissenting Opinion, in which he disagreed with the stay of the proceedings as advocated by the majority of the tribunal. In his view, the dispute settlement provisions both survive and coexist. One does not override the other. The investor could have brought the dispute before either the domestic court or the ICSID tribunal. Accordingly, the most significant advantage granted by a BIT to foreign investors is precisely this right to select the most attractive forum after the dispute arises (Supplementary Declaration, at paras 4–5, <http://ita.law.uvic.ca/documents/SGSvPhil-declaration_000.pdf>). What sets this case apart from most others is that the tribunal had already established, at the jurisdictional stage of the proceedings, that the only conceivable basis of claimant's claim was a breach of contract. Incidentally, this was also the case in Fedax v Venezuela . 78SGS v Philippines at paras 154–5. 79 A V Dicey, L Collins, and JHC Mornis, Dicey and Morris on the Conflict of Laws (London, Sweet & Maxwell, 13th edn, 2000) at 65–80. 80 W?lde describes the approach of the SGS v Philippines tribunal as ‘at first sight, eminently logical’. Thomas W W?lde, ‘The “Umbrella” Clause in Investment Arbitration—A Comment on Original Intentions and Recent Cases’ 6(2) JWIT 183 (2005) at 229. 81 Some tribunals have stressed the significance of the different wording of clauses as a (partial) basis for attributing a different meaning to a clause, see eg SGS v Pakistan , para 166; Salini v Jordan , para 126. Others have recognized that the mere differences in wording do not justify the radically opposed results attributed thereto by the various tribunals, El Paso , para 70. 82Art 31 Vienna Convention on the Law of Treaties. 83 See eg Art II(2)(c) of the US-Bulgarian BIT (<http://www.state.gov/documents/organization/ 43542.pdf>), described by the Noble tribunal as falling in to the category of the most general and direct formulations (para 60). 84 Anthony C Sinclair, ‘The Origins of the Umbrella Clause in the International Law of Investment Protection’ 20(4) Arb Int'l (2004) at 411–34. See also Alexandrov, above n 19, at 566–9. 85 Thomas W W?lde, ‘Contract Claims under the Energy Charter Treaty's Umbrella Clause: Original Intention versus Emerging Jurisprudence,’ in TW W?lde (ed), Investment Arbitration and the Energy Charter Treaty (New York, Juris Publishing, 2006) at 232. 86 Ibid at 235. 87 By contrast, the Eureko tribunal, as one of the tribunals that has given the broadest meaning to umbrella clauses, refers to Sinclair, above n 84 at para 251. 88CMS Gas Transmission Company v Argentine Republic (ICSID Case No. ARB/01/8), Award of 12 May 2005, <http://www.worldbank.org/icsid/cases/CMS_Award.pdf>. 89El Paso Energy International Company v Argentine Republic (ICSID Case No. ARB/03/15), Decision on Jurisdiction of 27 April 2006, <http://www.worldbank.org/icsid/cases/ARB0315-DOJ-E.pdf>; Pan American Energy LLC and BP Argentina Exploration Company v Argentine Republic (ICSID Case No. ARB/03/13), Decision on Preliminary Objections of 27 July 2006, <http://ita.law.uvic.ca/documents/PanAmericanBPJurisdiction-eng.pd>. 90 W?lde, above n 85 at 229. W?lde's analysis is partly based on the Impregilo v Pakistan and RFCC v Morocco decisions, in which the requirement was discussed for a contractual claim to amount to a violation of the BIT: that would require behaviour going beyond that which an ordinary party could adopt (the so-called ‘puissance publique’). These cases did not, however, involve umbrella clauses. 91 W?lde explains that cases made public after June 2005, such as Eureko and Noble , have not been incorporated. It is obviously perfectly proper to state so, but the two decisions are quite crucial to the debate. W?lde indicated that he would be submitting a revised version of his paper including a more extensive discussion of these cases. See W?lde, ibid at 205. Other authors have expressed a more favourable view on ‘elevating’ contractual claims onto the international plane: see Alexandrov, above n 19 at 569, characterizing authorities in favour of transformation as ‘overwhelming’. 92Noble Ventures, Inc v Romania (ICSID Case No. ARB/01/11), Award of 12 October 2005, <http://ita.law.uvic.ca/documents/Noble.pdf>, para 52. 93 W?lde, above n 80 at 206. An argument in favour of a pro-investor interpretation might be the wording of most umbrella clauses as bestowing obligations on the (state) parties rather than referring to rights and obligations, or referring to obligations of the state and the investor. In this light, reference may also be made to the possible parallel with case-law allowing the investor to choose from incorporating certain provisions from other BITs, without being required to incorporate all provisions as a ‘package’, see Siemens v Argentina para 109 (Siemens AG v Argentine Republic (ICSID Case No. ARB/02/8), Decision on Jurisdiction of 3 August 2004; <http://www.worldbank.org/icsid/cases/siemens-decision-en.pdf>); but see eg Plama v Bulgaria , paras 183–227 (advocating a much more limited interpretation of the most-favoured-nation provision in relation to procedural treatment) (Plama Consortium Limited v Republic of Bulgaria (ICSID Case No. ARB/03/24), Decision on Jurisdiction of 8 February 2005, 20 ICSID Rev-FILJ 262 (2005); 44 ILM 721 (2005), <http://www.worldbank.org/icsid/cases/plama-decision.pdf>). 94 W?lde has attempted to list criteria to qualify a dispute as commercial, but concedes the delineation is difficult, W?lde, above n 85 at 236. 95 C Schreuer, ‘The Coexistence of Local and International Law Remedies’, in F Ortino, A Sheppard, and H Warner, Investment Treaty Law—Current Issue Volume 1 (London: BIICL, 2006) at 162 (pointing out that whereas separating contract and BIT terms may be intellectually attractive, it is not necessarily practicable). See also Gaillard, who concludes that a historical examination of the origin of observance of undertakings clauses shows that the intention of states is to permit a breach of contract to be effectively characterized as the breach of a treaty, but that no conflict of jurisdiction arises as each tribunal asserts jurisdiction with respect to a distinct and independent cause of action. Above n 12 at 345. 96 Ibid . 97El Paso at para 77. 98 Jan Paulsson, ‘Arbitration without Privity’ 10 ICSID Rev-FILJ (1995) at 232. 99 See Sect (3)(b). 100 The El Paso tribunal also considered this possibility where it referred to Art 24(1)(1) of the 2004 US Model BIT, which elevates only the contract claims stemming from an investment agreement, para 80. See also W?lde, above n 85 at 211. It is noted, however, that this provision in the Model BIT refers to jurisdiction, not to substantive protection of the kind (arguably) provided by umbrella clauses. (<http://www.state.gov/documents/organization/38710.pdf>) and that, contrary to what W?lde suggests, does not provide for a direct obligation on investors not to breach an investment agreement. 101 A topic not further explored here is the question of what to do in a situation where an international tribunal exercises jurisdiction over contractual issues on the basis of an umbrella clause and is faced with a fork-in-the-road provision. Obviously, it is only when the tribunal agrees to ‘elevate’ a contractual claim that a dilemma occurs. Even assuming that any contractual forum selection clause will not in itself form an obstacle to the tribunal's jurisdiction, it is difficult to see how a distinction on the basis of the nature of the claim would allow the tribunal to overcome the hurdle of the fork in the road. In light of the lack of pertinent case-law, this issue will not be explored further at this stage. 102 Awards which raised this issue include, for example, Lanco v Argentina , Decision on Jurisdiction of 8 December 1998, paras 24 ff; Salini v Morocco , Decision on Jurisdiction of 23 July 2001, paras 25 ff; CMS v Argentina , Decision of the Tribunal on Objections to Jurisdiction, 17 July 2003, paras 70 ff; SGS v Pakistan , Decision on Jurisdiction of 6 August 2003, paras 146 ff; Azurix v Argentina , Decision on Jurisdiction, 8 December 2003, paras 83 ff; SGS v Philippines , Decision on Jurisdiction of 29 January 2004, paras 154; Eureko v Poland , Partial Award of 19 August 2005, paras 174 and 175; Aguas del Tunari v Bolivia , Decision on Jurisdiction of 21 October 2005, paras 109ff. 103 See eg Lanco v Argentina , para 26; Salini v Morocco , para 27. 104 Both the Azurix and the Aguas del Tunari tribunals, as cited above, recognize this problem and, after addressing it briefly, conclude that they need not to decide it, paras 85 and 118, respectively. 105 For a discussion of this issue, see Z Douglas, ‘The Hybrid Foundations of Investment Treaty Arbitration’ 74 BYIL 152 (2003); O Spiermann, ‘Individual Rights, State Interests and the Power to Waive ICSID Jurisdiction under Bilateral Investment Treaties’ 20(2) Arb Int 179 (2004). 106Partial Award of 19 August 2005. 107 Ibid at paras 174 and 175. The Decision on Jurisdiction (21 October 2005) in Aguas del Tunari v Bolivia also addresses this point and states that ‘it would appear that an investor could also waive its rights to invoke the jurisdiction of ICSID’ (para 118) before coming to the conclusion it need not decide this issue in the case at hand (available at <http://ita.law.uvic.ca/documents/AguasdelTunari-jurisdiction-eng_000.pdf>). 108 Cicero, De officiis, lib. III, 17, 69. 109 In certain languages, this term remains still unchanged, for example in German: ‘V?lkerrecht’. 110 For an enlightening summary of this position, see R Higgins, ‘Conceptual Thinking about the Individual in International Law’, in RF Falk, F Kratochil, and SH Mendlowitz (eds), International Law—A Contemporary Perspective (Boulder, Colo, Westview Press, 1985) at 476. 111 M Korowicz, ‘The Problem of the Personality of Individuals’ 50(3) AJIL 533 (1956) at 534 with further references. 112 See eg J Westlake, International Law (Cambridge, Cambridge University Press, 2nd edn, 1910) at 1ff; H Kelsen, Das Problem der Souver?nit?t und die Theorie des V?lkerrechts (T?bingen, 2nd edn, 1928) at 128, 130ff, 159ff; H Lauterpacht, International Law and Human Rights (London, Stevens & Sons Ltd, 1950) at 5ff, 10, 4–5. 113 See EB Weiss, ‘Invoking State Responsibility in the Twenty-First-Century’ 96 AJIL (2002) at 798 and PK Menon, ‘The International Personality of Individuals in International Law: A Broadening of the Traditional Doctrine’ 1 J Transn L & Policy 151 (1992) for an overview over recent developments. 114Reparation for Injuries Suffered in the Service of the United Nations [1949] ICJ Reports 174, 179. 115 Higgins, above n 110 at 478 with references to Plutarch and Francisco de Vitoria. 116 For a more detailed description of the features of these treaties, see PK Menon, above n 113 at 171 ff. Another example of individuals’ rights being recognized in treaties are the administrative tribunals of international organizations. Thus, for example, the United Nations Administrative Tribunal was established in 1949 and is competent to hear applications alleging non-observance of contracts of employment and terms of employment of staff members of the United Nations Secretariat. See DW Bowett, The Law of International Institutions (London, Sweet & Maxwell, 5th edn, 2001) at 416–29. 117Van Gend en Loos, 1 CMLR at 82, 129 (1963). 118LaGrand Case (Germany v US) [2001] ICJ Reports 000 (27 June), para 77; see also Separate Opinion of Vice President Shi. 119Jurisdiction of the Courts of Danzig, Advisory Opinion, 1928 PCIJ (Ser B) No. 15 at 17–19 (3 March). 120 Ibid at 17. 121United Nations Convention on the Law of the Sea, 10 December 1982, UN Doc A/CONF 62/122. 122 Ibid Art 91. 123Convention on the Prevention and Punishment of the Crime of Genocide, 9 December 1948, 78 UNTS 277, 279. 124Convention for the Suppression of Unlawful Seizure of Aircraft, 22 UST 1641, TIAS No. 7192. 125Montreal Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation, 23 September 1971, 24 UST 564, TIAS No. 7570. 126 For a more detailed description of the responsibility of individuals under the mentioned treaties, see Menon, above n 113 at 174–9. 127 I Brownlie, ‘The Individual before Tribunals Exercising International Jurisdiction’ 2 ICLQ 701 (1962) at 706–7. The General Assembly of the UN adopted a Resolution on 11 December 1946 in which, after taking note of the Agreement, it affirmed the principles of international law recognized by the Charter of the Nuremberg Tribunal and the Judgement of the Tribunal ( Brownlie, ibid at 707). 128 One of the crucial examples always referred to in that regard is the Statute of the ICJ, which provides in Art 34(1) that ‘Only States may be parties in cases before the Court’. 129 See Lauterpacht, above n 112 at 27, who states: ‘The position of the individual as a subject of international law has often been obscured by the failure to observe the distinction between the recognition, in an international instrument of rights ensuring to the benefit of the individual and the enforceability of these rights at his instance. The fact that the beneficiary of rights is not authorized to take independent steps in his own name to enforce them does not signify that he is not a subject of the law or that the rights in question are vested exclusively in the agency which possesses the capacity to enforce them.’ Similar observations may be found in Sir Hersch Lauterpacht, ‘The Subjects of the Law of Nations’ 63 LQR 438 (1947) at 451. 130 For an overview over the development of the procedural capacity of individuals, see Menon, above n 113 at 158–63. 131Convention for the Establishment of Central American Court of Justice, 20 December 1907, 2 AJIL 231 (Supp 1908) Art II. 132Convention Relative to the Creation of the International Prize Court, in James B Scott (ed), The Hague Conventions and Declarations of 1899 and 1907 (1915) at 189–90. 133Treaty of Versailles, 28 June 1919, Art 297, 13 AJIL 151 (Supp 1919) at 306. 134 The Supreme Restitution Court, established in 1952 pursuant to the World War II Convention, is not discussed here in detail, but is another example of individuals being able to enforce their rights before tribunals. 135 Korowicz, above n 111 at 552 ff. 136Convention on the Settlement for Investment Disputes between States and Nationals of Other States, 18 March 1965, 71 UST 1270, 575 UNTS 159. 137 Best-known examples for multilateral treaties are of course the North American Free Trade Agreement (NAFTA) of 1 January 1994 between Canada, Mexico, and the USA and the Energy Charter Treaty (ECT) of 17 December 1994. 138 See JL Brierly, The Law of Nations—An Introduction to the International Law of Peace (Oxford, Clarendon Press, 6th edn, 1963) (ed H Waldock) at 277, who states: ‘It has been suggested that a solution might be found by allowing individuals access in their own right to some form of international tribunal for the purpose, and if proper safeguards against merely frivolous or vexatious claims could be devised, that is a possible reform which deserves to be considered. For the time being, however, the prospect of states accepting such a change is not very great.’ Earlier, MO Hudson observed similarly: ‘Some States, e.g. the United States of America, have not been willing to be required to defend against the claims of aliens generally before their own national claims courts; their assumption of an obligation to permit claims to be made against them by individual aliens in an international tribunal, is even more difficult to envisage’. Hudson, International Tribunals (Washington, The Brookings Institution and the Carnegie Endowment for International Peace, 1944) at 202. 139 Note that PC Jessup goes so far to suggest that ‘A treaty would thus no longer be properly defined as an agreement between states; it may be an agreement between a state and an individual’. Jessup, A Modern Law of Nations (New York, Macmillan, 1952) at 27. It is respectfully submitted that at present treaties are public agreements concluded between states on behalf of communities—a logical consequence of the fact that an individual can have the quality of a subject of international law would be that treaties between individuals and states, both acting in their public international law capacity, are possible. However, until now, this remains only theoretical. 140 This debate is not new and has not occurred for the first time in relation to modern investment treaty arbitration. For example, in relation to the Iran-US Claims Tribunal, it was discussed whether the claims brought arose from inter-state disputes or were genuine individuals’ claims against a state. For an enlightening overview of this issue, see Douglas, above n 105 at 160–2. 141 For a more detailed description of this procedure, see WS Dodge, ‘Investor-State Dispute Settlement between Developed Countries: Reflections on the Australia-United States Free Trade Agreement’ 39(1) VJ Trans L 1 (2006). 142 See International Law Commission, Second Report on Diplomatic Protection, UN Doc A/CN.4/514 (2001) (prepared by John R Dugard) (discussing exhaustion of local remedies); International Law Commission, Third Report on Diplomatic Protection, UN Doc A/CN.4/523 (2002) (prepared by John R Dugard) (discussing exceptions to the general principle that local remedies must be exhausted). 143 See International Law Commission, First Report on Diplomatic Protection, Addendum, UN Doc A/CN.4/506/Add.1 (2000) (prepared by John R Dugard) (discussing requirement of continuous nationality); International Law Commission, Fourth Report on Diplomatic Protection, UN Doc A/CN.4/530 (2003) (prepared by John R Dugard) (discussing diplomatic protection of corporations and shareholders). 144Factory at Chorzow (Merits) 1928 PCIJ (Ser A) No17, 28 (Judgment 13 September). 145 For a further overview of the obstacles an investor seeking diplomatic protection has to overcome, see A K Bjorklund, ‘Reconciling State Sovereignty and Investor Protection in Denial of Justice Claims’ 45 VJ Int L 1 (2005) at 12–16. 146 Lauterpacht, above n 129 at 454. 147Barcelona Traction, Light and Power Company, Ltd, 1970 ICJ 3, 44 (Judgment 5 February). 148 Lauterpacht, above n 129 at 453–8; PC Jessup, ‘Responsibility of States for Injuries to Individuals’ 46 Col LR 903 (1946) at 908. 149 J Crawford, ‘The ILC's Articles on Responsibility of States for International Wrongful Acts: A Retrospect’ 96 AJIL 874 (2002) at 888. 150Award, 26 June 2003, Case No. ARB (AF)/98/3 (2003) 42 ILM 811, para 233. 151 Amended Memorandum of Fact and Law of the Applicant, the Attorney General of Canada, The Attorney General of Canada v SD Myers, Inc, Court File No. T-225-01, para 67, available at <http://www.dfait-maeci.gc.ca/tna-nac/documents/Myersamend.pdf>. 152 CH Brower, ‘Investor-State Disputes under NAFTA: The Empire Strikes Back’ 40 Colo J of Trans Law 43 (2001) at 63, 70 citing part of Mexico's submissions in United Mexican States v Metalclad Corporation . 153 Reply to the Counter-Memorial of the Loewen Group, Inc on Matters of Jurisdiction and Competence (26 April 2002) 33ff, <http://www.state.gov./documents/organization/9947.pdf>. 154 M Sornarajah, ‘State Responsibility and Bilateral Investment Treaties’ 20 JWTL 79 (1986) at 93. 155Mavrommatis Palestine Concessions ( Greece v UK ), Jurisdiction, (1924) PCIJ Rep Series A No. 2 (30 August) at 12. 156 These criteria have been addressed in far more detail by Douglas, above n 105 at 169–79. For the purpose of this analysis, it is perceived that the criteria addressed are those essentially illustrating the differences between proceedings truly involving two states and those involving an individual and a state and they will therefore be used here too in order to discuss the issue at hand. 157 In Gami Inc v United States of Mexico , NAFTA arbitration under UNCITRAL, Final Award rendered on 15 November 2004, the home state of the investor, the USA, intervened pursuant to Art 1128 and asserted that the tribunal had no jurisdiction to hear the claim. This argument was rejected (paras 11, 29 of the Award); in Mondev International Ltd v United States of America, Canada, the home state of the claimant, made submissions which insinuated that Mondev's claims should be dismissed. See Second Submission of Canada pursuant to Art 1128, 6 July 2001, <http://www.state.gov/documents/organization/18271.pdf>. 158 eg US Model BIT Art 1(d); Austria Model BIT Art 1(2); Sweden Model BIT Art 1(b); Energy Charter Treaty Art 1(6)(b); NAFTA Art 1139. 159 This was the case in eg CMS v Argentina , ICSID Case No. ARB/01/8, Decision of the Tribunal on Objections to Jurisdiction, 17 July 2003, where the tribunal, after evaluating the facts and upon recognition that its finding might open the door to competing claims from different investors under different treaties in relation to damages suffered by the same company, stated that the fact that the claimant's investment fell with in the definition of an ‘investment’ was sufficient to confer standing upon it in relation to its cause of action and proceeded to rule ‘… that it is not possible to foreclose rights that different investors might have under different arrangements’ (paras 65, 86); Azurix v Argentina , ICSID Case No. ARB/01/12, Decision on Jurisdiction, 8 December 2004, paras 64, 73. 160Partial Award, 13 September 2001. 161Final Award, 3 September 2001. 162CME Partial Award, 13 September 2001, para 376. 163Lauder Award, 3 September 2001, para 154. 164 See eg Waste Management, Inc v United Mexican States , ICSID Case No. ARB (AF)/00/3, Final Award, 30 April 2004, para 80; Franz Sedelmayer v The Russian Federation , Award, 7 July 1998 at 59, however, with Dissenting Opinion on this point. 165ICSID Case No. ARB/02/18, Decision on Jurisdiction, 29 April 2004. 166 Ibid at 40. 167[1970] ICJ Rep 3. 168[1970] ICJ Rep 42, para 70. 169[1955] ICJ Rep 4. 170 Ibid . 171 See also the ‘draft Articles on Diplomatic Protection’ adopted by the United Nations International Law Commission at its 58th session, 2006, paras 4 ff on the issue of nationality. 172Loewen Group, Inc and Raymond L Loewen v United States , ICSID Case No. ARB(AF)/98/3 (NAFTA), Award on Merits, 26 June 2003, <http://ita.law.uvic.ca/documents/Loewen-Award-2.pdf>. 173 Ibid, para 220. 174 Ibid, para 237. 175 For an overview of the positions, see Douglas, above n 105 at n 92. 176 See Olguin v Paraguay , ICSID Case No. ARB/98/5, Award, 26 July 2001, especially para 61. 177 This issue has been addressed and presumably settled in the case Champion Trading v Egypt , ICSID Case No. ARB/02/9, Decision on Jurisdiction, 21 October 2003, which referred to Art 25(2) ICSID Convention which prohibits dual nationals from bringing claims against the state of which they are also a national and therefore did not need to address the issue of the applicability of the ‘effective link’ doctrine. 178Art 44 of the ICSID Convention prescribes the sources of procedural rules for ICSID arbitrations, thereby omitting any reference to domestic law. Similarly, Art 53 excludes any remedies in relation to ICSID remedies except those provided for in Arts 50–2. 179 F Mann, ‘State Contracts and International Arbitration’ 42 BYIL 1 (1967) at 2. 180 This was also confirmed in the recent decisions on the Appeal in Occidental v Ecuador [2005] EWCA Civ 1116, [2005] 2 Lloyd's Rep 707 and in Saluka v Czech Republic of the Swiss Supreme Court dated 7 September 2006 (4P.114/2006). 181 Schreuer, above n 34 at 239. 182 Ibid at 240–1. These are also the criteria applied in the review of whether or not the prerequisites for a defence of lis alibi pendens have been fulfilled. See Katia Yannaca-Small, ‘Parallel Proceedings’ ch 25 below. 183 See eg CMS v Argentina where the tribunal considered that the provision had not been triggered because the claimant had not actually made a submission before the courts, and even if it had, this would not have triggered the clause because the parties and the cause of action were different. Decision on Objections to Jurisdiction of 17 July 2003, para 80. 184Azurix v Argentina , Decision on Jurisdiction of 8 December 2003, para 86. A further argument why a ‘fork-in-the-road’ provision should not be considered a bar to initiating international proceedings is the fact that many BITs contain so-called ‘effective means’ clauses. These clauses guarantee investors effective remedies under domestic law, thereby including redress through domestic courts or administrative tribunals (see eg Art II of the Argentina-US BIT). Although these provisions have not attracted the attention of tribunals (and claimants) these provisions might also be invoked to argue that fork-in-the-road provisions may not be applied in such a way as to create an unreasonable dilemma for investors when having to choose between domestic or international adjudication. See Schreuer, above n 34 at 248–50. 185North American Dredging Co Case (USA v Mexico ), (1926) 4 UN Rep 26, 29. 186 Douglas, above n 105 at 175. 187 See eg Alex Genin v Estonia , Award, 25 June 2001, para 331. 188 C Schreuer, The ICSID Convention— A Commentary (Cambridge, Cambridge University Press, 2001) at 392. 189 See eg Lanco v Argentina , ICSID Case No. ARB/97/6, Decision on Jurisdiction, 8 December 1998, para 39; Generation Ukraine v Ukraine , ICSID Case No. ARB/00/9, Award, 16 September 2003, paras 13.1–13.6; CME v Czech Republic , Partial Award, 13 September 2001, para 417. 190 C Amerasinghe, Local Remedies in International Law (Cambridge, Cambridge University Press, 2nd edn, 2004) at 61. 191Factory at Chorzow, (Merits) 1928 PCIJ (Ser A) No. 17, 28 (Judgment 13 September). 192 Ibid at 28. 193 The recent decision on the appeal of Ecuador against the award in Occidental v Ecuador , [2005] EWCA Civ 1116, [2005] 2 Lloyd's Rep 707 clarified any doubt on this point and rejected arguments on the applicability to the English doctrine of non-justiciability to investment treaty awards. 194Art 1136(7) of NAFTA provides that a claim under Chapter 11 ‘shall be deemed to arise out of a commercial relationship or transaction for the purposes of Article I of the New York Convention and Article I of the Inter-American Convention’. A similar provision is contained in Art 26(5)(b) of the Energy Charter Treaty and in some Model BITs, eg the Austria Model BIT Art 14. 195Factory at Chorzow, (Merits) 1928 PCIJ (Ser A) No.17, 28 (Judgment 13 September), at 33. 196 Supporting this conclusion: J Paulsson, ‘Arbitration without Privity’, in T W?lde (ed), The Energy Charter Treaty: An East-West Gateway for Investment and Trade (London The Hague, and Boston, Kluwer Law International, 1996) at 422, 441; J Crawford, The Creation of States in International Law (Oxford, Oxford University Press, 2nd edn, 2006) at 29; O Spiermann, ‘Twentieth Century Internationalism in Law’ 18(5) European JIL 785 (f 2007); P Juillard, ‘Les conventions bilat?rales d'investissiment concludes par la France’ 106 Journal du droit international 274 (1979) at 290; RJ Zedalis, ‘Claims by Individuals in International Economic Law: Nafta Developments’ 7 American Review of International Arbitration 115 (1996) at 117 n 14; Mohamed Bennouna, Preliminary Report on Diplomatic Protection, UN Document A/CN.4/484 (1998), para 39. 197 See eg the Austrian Model which states in Art 5(3): ‘An investor of a Contracting Party which claims to be affected by expropriation by the other Contracting Party shall have the right …’ (emphasis added). 198[2005] EWCA Civ 1116, [2005] 2 Lloyd's Rep 707. 199 Ibid, para 18 with reference to Oppenheim's International Law (London, Addison Wesley Publishing Company, 9th edn, 1997), para 375. 200 Ibid, para 18 with reference to Douglas, above n 105 at 182–4. 201 It is interesting to note in this context that the ILC's Articles on Responsibility of States for Internationally Wrongful Acts do not go as far as providing that investment treaty rights are rights vested in the investor rather than the state. They adopt a distinction between primary and secondary obligations, see in particular Art 33. The idea behind this is ‘that a breach of a primary obligation gives rise, immediately by operation of the law of state responsibility, to a secondary obligation or a series of secondary obligations (cessation, reparation …)’. See Crawford, above n 149 at 876. By not taking a clear position on the question to whom the primary obligation is owed, the Articles take a rather conservative approach with regard to individuals as subjects of international law in general, and with regard to the rights in treaties, in particular. This was strongly criticized by Weiss, above n 113 at 798ff. Crawford observes in that regard: ‘However, what Article 33 clearly shows is that the secondary obligations arising from a breach may be owed directly to the beneficiary of the obligation, in this case the investor, who effectively opts in to the situation as a secondary right holder by commencing arbitral proceedings under the treaty. A new legal relation, directly between the investor and the responsible state, is thereby formed, if it did not already exist. Thus, at some level a modern bilateral investment treaty disaggregates the legal interests that were clumped together under the Mavrommatis formula’ (footnote omitted). Crawford, above n 149 at 888. 202 Z Douglas, ‘Nothing if Not Critical for Investment Treaty Arbitration: Occidental, Eureko and Methanex’ 22(1) Arb Int'l 27 (2006) at 37. 203Albert and Le Compte v Belgium , Judgment of 10 February 1983, ECHR Series A No. 58, para 35 and H v Belgium , Judgment of 30 November 1987, ECHR Series A No. 127-B, para 54. 204Barber?, Messegu? and Jabardo v Spain , Judgment of 6 December 1988, ECHR Series A No. 146, para 82 and Oberschlick v Austria , Judgment of 23 May 1991, ECHR Series A No. 204, para 51. 205H?kansson and Sturesson v Sweden , Judgment of 21 February 1990, ECHR Series A No. 171-A, para 67, McGonnell v United Kingdom , Judgment of 8 February 2000, ECHR Reports 2000-II, para 44 and Lundevall v Sweden , Judgment of 12 November 2002, not reported, para 34. 206Pfeifer and Plankl v Austria , Judgment of 25 February 1992, ECHR Series A No. 227, para 37; Pailot v France , Judgment of 22 April 1998, ECHR Reports 1998-II, para 52 and Sch?ps v Germany , Judgment of 13 February 2001, ECHR Reports 2001-I, para 48. 207 This was also alluded to by the tribunal in SGS v Philippines , which stated that ‘It is, to say the least, doubtful that a private party can by contract waive rights or dispense with the performance of obligations imposed on the States parties to those treaties under international law. Although under modern international law, treaties may confer rights, substantive and procedural, on individuals, they will normally do so in order to achieve some public interest’ (SGS v Philippines, above n 10 at para 154, footnote omitted). It has been suggested that this ‘public interest’ might make it worth considering drawing a distinction between a waiver of the investor's rights after a dispute has arisen, in full knowledge of the situation, and a blanket waiver for any dispute that might possibly arise in the future. The latter might be more difficult to accept. Nevertheless, this does not change the initial situation whereby these rights are vested in the individual investor and thus limitations with regard to the way he wishes to exercise them need to be made cautiously. 208Elettronica Sicula SpA (ELSI) (United States v Italy ) (1989) ICJ 15 at 42, affirmed in Loewen v United States , Award of 26 June 2003, at para 160. Authors: Katia Yannaca-Small Keywords: Parallel proceedings – Consolidation of claims – Lis alibi pendens – Res judicata – Waiver – Claims – Umbrella clause – Admissibility – Exhaustion of local remedies This chapter examines the most common situations where parallel proceedings can occur in investment arbitration. It considers whether the principles of res judicata and lis pendens apply in investment arbitration and could prevent conflicting awards. Finally, the chapter looks at the way investment treaties regulate and/or prevent the occurrence of parallel proceedings, with a particular emphasis on the consolidation of claims.

0subscriber_article?script=yes&id=%2Fic%2FMonograph%2Flaw-iic-9780199231386&recno=62&searchType=browse Chapter 25 Parallel Proceedings ?

(1)When can Parallel Proceedings Occur in Investment Arbitration?1010

(a) Wide Definition of an Investor 1010

(b) Treaty/Contract Claims 1012

(c) Jurisdictional Overlap 1012

(2)Addressing Parallel Proceedings through the Principles ofRes Judicata,Lis Pendens: Does it Work in Investment Arbitration?1013

(a) Res Judicata1014

(i) Recognition and Application of Res Judicata in Investment Arbitration 1015

(ii) The Requirements of Res Judicata1017

(iii) The Applicability of the ILA Recommendations on Res Judicata in Investment Arbitration 1020

(b) Lis Alibi Pendens1021

(i) Recognition and Application of Lis Alibi Pendens in Investment Arbitration 1022

(ii) The Applicability of the ILA Recommendations on Lis Alibi Pendens in Investment Arbitration 1024

(3)Treaty-based Regulation/Prevention of Parallel Proceedings: Exhaustion of Local Remedies, Fork-in-the-Road, Waiver, and Umbrella Clauses1025

end p.1008

(a) Exhaustion of Local Remedies 1025

(b) Fork in the Road 1026

(c) Waiver Provisions 1028

(d) Umbrella Clause 1030

(4) ° Consolidation of Claims1032

(a) State Practice and International Rules 1034

(b) Jurisprudence 1036

(i) Consolidation ‘Stricto Sensu’ 1036

(ii) ‘De facto’ Consolidation 1037

(c)Rationale for the Consolidation of Claims: Arguments in Favour of Consolidation1038

(i) Efficiency 1039

(ii) Avoidance of Inconsistent or Contradictory Awards 1040

(d)Arguments against Consolidation of Claims1041

(i) Parties' Consent 1042

(ii) Non-participation in the Appointment of the Tribunal 1043

(iii) Infringement of a Party's Substantive Rights 1043

(iv) Apportionment of the Costs of Arbitration 1045

Concluding Remarks1045

INVESTMENT arbitration has expanded in the past decade thanks in part to the more than 2,500 bilateral investment treaties (BITs) now in force around the world as well as NAFTA, the recently concluded free trade agreements (FTAs), and other regional and multilateral investment treaties such as the Energy Charter Treaty. As the number of investment agreements has risen, the cases brought to dispute settlement have become increasingly complex too, encompassing multiple contracts and hence multiple parties and issues. The multiplication of investment agreements with investor-state dispute settlement provisions has raised the risk of multiple and conflicting awards, as the same dispute can lead to awards under different treaty regimes, as well as under different contracts.

Investors seeking to pursue claims for damages often have a choice of fora, that is, either of different arbitration regimes or of arbitration or a national court. Corporations are reported to begin structuring their transactions in such a way as to be able to benefit from the provisions of different BITs. The ‘Czech cases’ (CME v the Czech Republic and Lauder v The Czech Republic ) and the approximately 40 cases currently pending against Argentina and arising from the same events demonstrate the increasing complexity of forum decisions.

The phenomenon of parallel proceedings in investment arbitration which could lead to potentially conflicting awards can be the result of—mainly—three different situations: (i) where, because of the wide definition of investor to include direct and indirect shareholders, investors are able to claim breaches of different BITs and to seek relief through different arbitration proceedings under each of the invoked

end p.1009

treaties in respect of a single investment and regarding the same facts; (ii) where an investor may have both treaty and contract claims based on the same facts against the same host government; and (iii) where there is a jurisdictional overlap, that is where the same international dispute might be subject to adjudication by more than one international judicial body.

In the procedural laws of most jurisdictions there are well-developed rules available to the judge in order to deal with parallel and multiple proceedings. Such rules include the principles of lis pendens and res judicata, forum non-conveniens, anti-suit injunctions, as well as mandatory and discretionary consolidation of proceedings having a close connection with each other. The arbitration laws of most jurisdictions typically do not give arbitrators the same tools; nor are such issues usually regulated by the arbitration rules of arbitration institutions or by international instruments.

What are the tools currently available to prevent or minimize the negative effects of parallel proceedings in investor-state arbitration? Is there any guidance drawn from the domestic systems or general international law? Do international investment treaties provide for any ways to deal with this issue? This chapter looks briefly at the most common situations where parallel proceedings can occur in investment arbitration, 1 then examines whether the principles of res judicata and lis pendens apply in investment arbitration and could prevent conflicting awards; and finally looks at the way investment treaties regulate and/or prevent the occurrence of parallel proceedings, with a particular emphasis on the consolidation of claims.

(1) When can Parallel Proceedings Occur in Investment Arbitration?

(a) Wide Definition of an Investor

Many, if not most BITs, protect not only investments made by nationals, individuals, and corporations of one state directly into the other state, but also investments made indirectly through a company established in one party but controlled by an investor in a non-party. The extension of treaty protection to indirect shareholders

end p.1010

creates an option for a group of companies to bring multiple claims through different companies in the group regarding the same investment and against the same measures of the host state. 2 The CME and Lauder cases against the Czech Republic are an example of such a situation. 3 The Czech Republic was subject to two different UNCITRAL proceedings concerning certain governmental measures with regard to a local company that owned a TV licence. The claims were brought almost simultaneously by the ultimate controlling shareholder, a US investor, Lauder, under the US-Czech Republic BIT in London and by a Dutch company, the CME Czech Republic that held shares in the local company, under the Netherlands-Czech Republic BIT in Stockholm. The Czech Republic prevailed against Lauder, but was ordered to pay a substantial compensation to CME.

The Lauder tribunal acknowledged the potential problem of conflicting awards, noting ‘that damages [could] be concurrently granted by more than one court or arbitral tribunal …’. Nevertheless, it reasoned that ‘the second deciding court or arbitral tribunal could take this fact into consideration when assessing the final damage’. 4 The CME tribunal addressed the ramifications of the parties’ parallel proceedings but found no bar to adjudicating the same dispute; 5 investors who are minority shareholders may be able to bring claims, too. A particular company may have minority shareholders of various nationalities. Hence, the host state may face multiple arbitrations under different BITs in relation to essentially the same set of facts. In recent arbitration cases a broad notion has been emerging of what constitutes an ‘investor’ and ‘investment’. Foreign corporations frequently establish local ventures as indirect subsidiaries, incorporated in the host state and held in

end p.1011

a multi-tier arrangement. The tribunal in CMS v Argentina6 was the first to recognize that non-controlling minority shareholdings constitute an ‘investment’ for the purposes of the ICSID Convention and most BITs. 7 Given the great number of non-controlling minority shareholders in each company, the risk of multiple proceedings over the same claim based on the same measures is real.

(b) Treaty/Contract Claims

A second issue which could be a source of parallel proceedings is the coexistence of contract and treaty claims. BITs establish a legal framework for the treatment and protection of foreign investment and investors and any claims arising from the treaty are treaty claims. However, foreign investment also involves contracts between the investor and the host state or entities of the host state, for example in the form of concession contracts. Although the rights of the investor under each instrument are different, sometimes they may overlap. When a state-owned company breaches a contract concluded with a foreign investor—or when the host state breaches the contractual commitments assumed with a company in which a foreign investor has a stake—investors may have both contract and treaty claims against the host state. This has an impact on determinations of jurisdiction.

(c) Jurisdictional Overlap

Another relevant issue is the interrelation between international courts and tribunals and the potential overlap that may exist. For instance, a case of indirect expropriation of property belonging to a foreign investor might give rise to arbitration under ICSID (based on a BIT, an investment contract, or another investment agreement),

end p.1012

under universal and human rights procedures such as the HRC and the ECHR (under human rights treaties) and inter-state adjudication, for example the ICJ. 8 The question arising in this case is whether claims concerning the same facts but emanating from different legal bases can be considered as the same. 9 Presumably, this competition can only arise if it is shown that the international dispute has common attributes even when addressed under different treaty regimes.

(2) Addressing Parallel Proceedings through the Principles of Res Judicata, Lis Pendens: Does it Work in Investment Arbitration?

Only proceedings which address the same claims, demand or cause of action between the same parties qualify as competing procedures. The attitudes of the legal community towards the situation of competing/parallel proceedings are reflected in the application of the traditional jurisdictional regulating rules such as res judicata and lis pendens. These rules are of restricted temporal and substantive scope: the res judicata rule serves as a bar against adjudication only after the first proceedings are concluded and a valid judgment issued, while the lis pendens bars a

end p.1013

second litigation only during the pendency of another set of proceedings. After the end of the proceedings, the rule does not prohibit the initiation of new proceedings elsewhere.

While these two principles are recognized and applied in domestic systems, their application in cross-boundary litigation in the relations between international fora is not always clear. Yet the principal policy arguments against parallel litigation within the same legal system (judicial economy and legal security by avoiding the risk of inconsistent decisions) apply, as mentioned above, also at the international level.

These principles are found neither in arbitration institution rules 10 nor in international investment instruments. There are relatively few cases in which international tribunals or panels have evoked, relied upon, or applied these principles and even fewer in the field of investment arbitration. The ILA Committee on International Commercial Arbitration has undertaken an extensive study and discussion on both principles and recently, at the June 2006 meeting in Toronto, adopted Recommendations which, although non-binding, could ‘identify aspects where transnational rules could be developed’ and could be used ‘as a guidance to arbitrators when faced with an argument that other proceedings dealing with the same matter are running in parallel and that the arbitral tribunal should suspend or terminate the arbitration’. Some of these Recommendations are of direct relevance to investment arbitration.

(a) Res Judicata

The ILA Committee on Commercial Arbitration in its 2004 Interim Report stipulated that ‘the term res judicata refers to the general doctrine that an earlier and final adjudication by a court or arbitration tribunal is conclusive in subsequent proceedings involving the same subject matter or relief, the same legal grounds and the same parties (the so-called “triple-identity” criteria)’. It is a principle of judicial economy aimed at preventing re-litigation of already decided cases and serves the purpose of legal security by avoiding the potential of divergent decisions in identical cases. 11 It is accepted that it is a rule of international law as a clear example of a

end p.1014

general principle of law recognized by civilized nations. 12 Some refer to it as a rule of customary international law. 13

Res judicata (or the principle of finality) is said to have: a positive effect (namely, that a judgment or award is final and binding between the parties and should be implemented, subject to any available appeal or challenge); and, a negative effect (namely, that the subject-matter of the judgment or award cannot be re-litigated a second time, also referred to as ne bis in idem). 14

The positive effect is largely uncontroversial 15 and is considered when determining the possibility of some recourse against an existing decision: the concept is accepted as directly pertinent in international law. Ne bis in idem is a guarantee for the defendant not to be prosecuted again for the same fact and, as is also the case with lis pendens (preventive effect), it has not yet acquired the status of a rule of international law. 16

(i) Recognition and Application of Res Judicata in Investment Arbitration

At the international level, the principle has been applied but in a sporadic way and essentially as a confirmation of its positive effect. The ICJ has recognized res judicata in a number of cases. 17 The European Court of Justice (ECJ) has also relied upon

end p.1015

res judicata in order not to admit cases that have already been decided by previous judgments 18 and arbitral tribunals applying international law have confirmed the doctrine of res judicata. 19

In the Southern Pacific Properties v Egypt case (the ‘Pyramids’ case) an ICSID tribunal refused to adopt findings of fact reached by ICC arbitration in earlier litigation of the same dispute—the ICC award had been nullified by the domestic courts. The reason stated by the tribunal was that the ICSID rules of procedure require tribunals to make their own findings of fact and law. It accepted jurisdiction over the case, rejecting the Egyptian claim that previous rulings in the case had res judicata effect. 20 This reasoning was inconsistent with an earlier ICSID case, which showed a willingness to apply the res judicata rule (Amco Asia Corp v Indonesia ). 21

Res judicata was found to be part of international law applicable to international investment arbitration in the second proceedings instituted by Waste Management against Mexico (Waste Management II ). The tribunal, as a response to Mexico's preliminary objection concerning the previous proceedings (Waste Management I ), held that: ‘There is no doubt that res judicata is a principle of international law and even a general principle of law within the meaning of Article 38(1) c of the statute of the International Court of Justice’. 22

Mexico challenged the admissibility arguing that the decision in the first proceedings 23 dismissing the claims for lack of jurisdiction constituted res judicata which prevented the claimant from again raising the claim. This argument was rejected by the tribunal: ‘the present tribunal in no way denies the value of the principle of res judicata nor its potential application in the present proceedings to the extent that any issue already decided between the parties may prove to be relevant at a later

end p.1016

stage’. In applying the standard of ne bis in idem, it considered that there was no identity of issues.

In Plama Consortium Ltd v Republic of Bulgaria , the respondent asked the tribunal to suspend the proceedings pending the outcome of Swiss litigation to determine the ownership of shares by the claimant, arguing that there was a risk of a second arbitration claim by the new owners. The tribunal, referring to the doctrine of res judicata stated that its decision would be binding on the claimant with new shareholders. 24

(ii) The Requirements of Res Judicata

What are the elements that could transform two or more sets of proceedings into competing proceedings under international law? There is a widespread acknowledgement that the main preconditions for res judicata (and lis pendens as well) to apply in international law are the following: (i) the proceedings must have been conducted before courts or tribunals in the international legal order; (ii) the proceedings must involve the same relief; (iii) they must involve the same grounds; and (iv) they must be between the same parties.

The Same Legal Order

Res judicata in international law has been viewed as relating only to the effect of a decision of one international tribunal on a subsequent international tribunal. There is an established law that the decisions of domestic courts cannot constitute res judicata vis-?-vis international courts and tribunals that belong to a different legal order. 25 Included in the same legal order are tribunals established under treaties and mixed arbitration tribunals (between private investors and host states).

The ILA Committee in its Recommendations considered this requirement to go to the heart of a complex, evolving area and that the various legal orders (domestic, international, public, private) are not impermeable. It decided therefore not to include it in its Recommendations:

In order not to prejudge further developments … the Committee decided not to include the ‘same legal order’ as a requirement in its Recommendations. That decision was also inspired by the complexity of the issues raised as well as the Committee's impression that a process of permeation and interaction between different legal orders is only beginning and may result

end p.1017

in the legal community no longer viewing private law and public law as operating in separate legal orders’. 26

Identity of Relief

Res judicata applies only if the same ‘object’ or ‘relief’ (or petitum) is sought in different proceedings. Some commentators argue against the strict requirement of the identity of relief and grounds which could lead to ‘claim splitting’ in order to avoid the res judicata effect of a previous award by asking for a different relief. 27

Identity of Grounds

Res judicata applies when the ‘grounds’ (or causa petendi) of the two claims are the same. It is common that acts of states are subject to more than one treaty instrument and therefore more than one dispute settlement mechanism. By way of example, a situation which involves expropriation of property belonging to a foreign investor might give rise to proceedings under human rights procedures (ECHR), investor-state arbitration (ICSID or other), and state-state arbitration (ICJ). If these proceedings involve the same parties in interest and essentially the same grounds but are based on different legal instruments, can they be regarded as essentially the same?

Some tribunals lean towards the view that the decisive test for determining whether two claims involve the same issues is legal and not factual. 28